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Budget 2016: Loans to participators

Budget 2016: Loans to participators

  • United Kingdom
  • Tax planning and consultancy - Budget


Today the Chancellor announced that, from 6 April 2016, the rate of tax charged on close companies when they make a loan to a participator (broadly a shareholder) which remains outstanding for more than 9 months will increase from 25% of the value of the loan to 32.5%.

The rationale for the increase is to mirror the new upper effective rate on dividends which also take effect from 6 April 2016. This change is designed to ensure that the loans to participators rules remain an effective deterrent to owner/managers extracting cash from their businesses in a manner that circumvents or defers the income tax that would otherwise be payable on a dividend and/or salary payment.

Although, of wider application, this is another move that targets tax avoidance through the use of personal service companies.

Please view our dedicated Budget 2016 hub here. It will give you access to our watch list, our contributors and relevant articles and tweets.

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