The recent Advanced Tax exams indicate that the examining panel is focusing more on small family companies as opposed to large groups.
The vast majority of UK companies are close companies and controlled by a few individuals or a single-family.
It was amazingly easy for these companies to offer loans to the shareholders which were never paid back.
HMRC introduced the anti-avoidance provision, s455 CTA 2010 to combat this by requiring close companies to make a tax payment based on 32.5% of the loan if the loan is outstanding when corporation tax is due.
For many of you working in audit or accounts preparation, you know that a red flag to look out for is a director’s overdrawn loan account.
This then requires urgent action in terms of ensuring additional director’s remuneration or dividend payouts.
In this month’s edition of PQ Magazine, I have explained close companies using simple examples to help you master this important area and pick up marks quickly in the exam.
PQ is an amazing free resource for Part Qualified Accountants and is headed up by its formidable editor Graham Hambley who always speaks out for finance students.
I recommend you subscribe to PQ.