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What are Implications of Written Off Loans?

Despite getting constant aid from the government, many businesses are still struggling to keep up with profits after the pandemic. Corona business interruption loan scheme and bounce back loan scheme are some of the leading examples of the steps taken by the government to help out big and small-scale businesses.

Many businesses may not be able to repay the loans. That’s why they closing down their accounts in banks. What happens when a company decides to write off loan? Find out everything in this article:

  • If there’s a tax charge of 32.5% under s455 CTA 2010 on a participator (who doesn’t happen to be a director) An additional income tax charge applies if the loan is written off.
  • This type of tax charge comes under ITTOIA 2005, s415. This only applies if the corporation tax charge is applicable to a company.
  • Where the loan was written off on or after 6 April 2016, the taxable amount is the same as the amount written off.
  • Box 12 on page Ai1 of the additional pages of the tax return clearly mentions the loans written off. A white space disclosure notice may be added by the practitioners for any further information.

Don’t expect any National Insurance Charges if the loans are written off. This also might apply to you if you’re not earning at the moment. Note that if there’s a participator or a director involved, he might have to pay double taxes if the loan is written off.

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