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Q: My client is a shareholder in a close company. The company made a loan to my client and paid tax under CTA 2010 S455. The company will now waive/write off this loan. What are the tax implications?

A: As the loan is subsequently waived or written off, the close company can reclaim the tax charge. This is by way of a claim which may either be made in the tax return, on the CT600A supplementary pages, or Form L2P outside the tax return. The time limit for claims made outside the tax return is four years after the end of the financial year in which the loan was repaid, released or written off.

On the waiver or write off of the loan, a savings or investment income tax charge arises for the participator. The effect of this is that the participator is deemed to receive dividend income equal to the amount waived or written off. The participator will therefore be charged to tax on the amount of this income according to their marginal rate.