s455 Corporation Tax Explained for Director’s Loans
s455 Corporation Tax can arise where a close company makes a relevant loan to a participator and the amount remains outstanding beyond the applicable post-year-end repayment period.
Accounting & Tax Associates Ltd helps owner-managed companies reconcile director’s loan accounts, review repayments, complete CT600A reporting and assess potential section 455 liabilities.
s455 Corporation Tax Applies to Certain Close Company Loans
Section 455 of the Corporation Tax Act 2010 can impose an additional Corporation Tax charge where a close company makes a relevant loan or advance to a participator or an associate of a participator.
In many owner-managed companies, the participator is a shareholder who is also a director. This is why s455 commonly arises in connection with an overdrawn director’s loan account.
The charge is imposed on the company. It does not convert the loan into salary or a dividend and does not, by itself, remove the amount owed by the director.
What Is the Current s455 Corporation Tax Rate?
The rate depends on when the relevant loan or benefit was made. It is therefore important not to automatically apply one rate to every historic director’s loan.
From 6 April 2026
HMRC’s current Company Taxation Manual states that the s455 rate is 35.75% for loans made on or after 6 April 2026.
6 April 2022 to 5 April 2026
Relevant loans made during this period were subject to the 33.75% rate where the section 455 charge applied.
6 April 2016 to 5 April 2022
Earlier loans may fall within previous rates, so historic balances should be reviewed according to when the loan was made.
When Does s455 Corporation Tax Become Payable?
A key question is whether the relevant loan remains outstanding more than 9 months after the end of the company’s Corporation Tax accounting period.
If qualifying repayment, release or write-off occurs within the relevant period, relief may be reflected when completing CT600A.
However, repayments followed by further borrowing need separate consideration because anti-avoidance rules can prevent the repayment from achieving the expected result.
Illustrative s455 Corporation Tax Calculations
These examples assume the whole relevant amount remains chargeable and use the current 35.75% rate for loans made on or after 6 April 2026.
£10,000 Loan
Illustrative section 455 Corporation Tax charge.
£25,000 Loan
Illustrative section 455 Corporation Tax charge.
£50,000 Loan
Illustrative section 455 Corporation Tax charge.
These are simplified illustrations only. The actual charge can depend on loan dates, repayments, releases, write-offs, exclusions and anti-avoidance provisions.
CT600A is used in connection with close-company loans and certain arrangements conferring benefits on participators.
s455 Is More Than Just a Tax Calculation
The company’s Corporation Tax return may also need supplementary CT600A reporting.
HMRC’s current guidance requires information about relevant loans, balances and qualifying repayments or releases to be reflected in the supplementary pages where applicable.
A loan can therefore require CT600A reporting even where subsequent repayment means no ultimate s455 amount becomes payable.
What Happens If the Director Repays the Loan?
Repayment can reduce or eliminate the amount on which section 455 becomes payable, subject to the detailed rules.
Repaying the Loan and Immediately Borrowing Again
HMRC has specific rules designed to prevent loans being temporarily repaid simply to avoid the section 455 charge before substantially the same money is borrowed again.
The rules include a mechanical 30-day rule and a separate arrangements rule for certain larger balances.
Where the underlying loan is subsequently repaid, released or written off, the company may become entitled to relief from the earlier section 455 charge.
Can s455 Corporation Tax Be Reclaimed?
Yes, relief can generally be available where the relevant loan is later repaid, released or written off.
HMRC states that the company must make a claim, and the claim time limit is generally four years from the end of the financial year in which the repayment, release or write-off occurs.
The timing of when HMRC can repay the amount is different from the date on which the director actually repays the loan.
From Original Loan to Recovery of the Tax
s455 Tax and Beneficial-Loan Tax Are Not the Same Thing
A director’s loan can potentially create more than one tax issue.
s455 Corporation Tax
This is a Corporation Tax charge on the company where the close-company loan rules apply.
Relevant to: Close-company loans to participators and related persons.Beneficial Loan
A cheap or interest-free loan can separately create an employment-related benefit issue.
Relevant to: The loan balance, interest charged and applicable beneficial-loan rules.Problems We Frequently Look for at Year End
Related Director’s Loan & s455 Guides
s455 Connects With the Company’s Wider Accounts and Tax Position
A director’s loan normally needs to be considered alongside bookkeeping, dividends, payroll, statutory accounts and the Corporation Tax return.
s455 Corporation Tax Guidance
s455 Corporation Tax FAQs
Common questions from directors and shareholders of owner-managed companies.
What is s455 Corporation Tax?
Section 455 can impose an additional Corporation Tax charge on a close company where certain loans or advances are made to participators or their associates and remain outstanding.
What is the current s455 tax rate?
HMRC’s current guidance states that loans made on or after 6 April 2026 are subject to a 35.75% rate where section 455 applies. Historic loans can be subject to earlier rates.
Is the s455 rate still 33.75%?
33.75% applies to relevant loans made from 6 April 2022 to 5 April 2026. For loans made from 6 April 2026, HMRC’s current published rate is 35.75%.
Does s455 apply immediately when a director takes money?
The final charge depends on the loan position and subsequent repayments. In particular, whether amounts remain outstanding beyond the relevant period following the accounting period end is important.
Do I need CT600A if the loan is repaid?
CT600A can still need to report a loan and repayments made after the accounting period end, including qualifying repayment within the following 9 months.
Can s455 Corporation Tax be reclaimed?
Relief can generally be claimed where the relevant loan is later repaid, released or written off, subject to the statutory timing and claim requirements.
Does paying s455 clear the director’s loan?
No. The section 455 tax charge is separate from the underlying debt. The director can continue to owe the company the loan balance.
Can I repay the loan and borrow it again?
Care is required because HMRC has anti-avoidance rules dealing with repayments followed by new borrowing, including the 30-day rule and arrangements rule.
Is a director’s loan over £10,000 automatically subject to s455?
The £10,000 figure is particularly relevant to separate beneficial-loan considerations. Section 455 has its own rules, and the two regimes should not be confused.
Review the Director’s Loan Before Filing the CT600
Tell us the company year end, approximate loan balance, dates of significant withdrawals and any repayments made after year end.
Tell Us About the Director’s Loan
Provide a short overview and we can assess the likely accounting and Corporation Tax issues.