Introduction Rule Two: Arrangements rule
22.Section 464C(3) applies if the 30 day rule does not apply to a repayment and the repayment is made under arrangements which result in a further amount being paid to the participator. In these circumstances, the repayment is to be treated as a repayment of the new chargeable payment (so far as the amount of the repayment does not exceed the amount of the new chargeable payment).
Example 1:
A Ltd lends a participator £20,000 which is still outstanding at the end of the accounting period. 35 days before the section 455 tax becomes due and payable, the participator receives a further £25,000 payment from the company. The original £20,000 is repaid using £20,000 of the £25,000 new loan.
It is likely in this situation that the repayment of £20,000 would be treated as a repayment of £20,000 of the new £25,000 loan so the original loan would be treated as not repaid and so the section 455 tax would become due and payable.
Example 2:
B Ltd lends a participator £30,000 which is still outstanding at the end of the accounting period. During the nine month period leading up to the due and payable date, the full amount is repaid using a 40 day bank loan. The bank loan is repaid using a further loan of £30,000 from the company.
There are clear arrangements here and so the original loan would be treated as not repaid and so the section 455 tax would become due and payable unless a further repayment was made.