If a close company provides a loan to a participator — most commonly a shareholder or director-shareholder — there can be additional corporation tax implications if the loan is not repaid within the required timeframe.

This tax is often referred to as the Section 455 (s.455) tax charge.

What Has Changed?

For loans made on or after 6 April 2026, the Section 455 tax rate increased from 33.75% to 35.75%.

The charge applies where money is borrowed from the company and remains outstanding at the end of the company’s accounting period.

When Can Relief Be Claimed?

If the loan is:

  • fully repaid,
  • released, or
  • written off

within nine months of the company’s year-end, the company may be able to reclaim the Section 455 tax through its corporation tax return.

However, HMRC will only allow relief once the repayment has actually been made. Relief cannot be claimed based on planned or future repayments.

Why Timing Matters

It’s important for shareholders and directors to carefully monitor outstanding loan balances before corporation tax returns are submitted.

If a repayment is made after the return has already been filed, the corporation tax position may need to be amended in order to recover any tax due back from HMRC.

At Harris Lacey and Swain, we can help you review director and shareholder loan accounts, ensure the correct treatment is applied, and help you avoid unnecessary tax charges.

If you think this may affect you or your business, please speak to our team for tailored advice.