Loans to participators – Can I reclaim Corporation Tax on a repaid director’s loan via the CT600?

A company can reclaim Corporation Tax paid on a director’s loan that has been repaid, written off or released. The relief is due 9 months and 1 day after the end of the Corporation Tax accounting period when the loan was repaid, written off or released.

The reclaim can be made using form CT600A attached to the CT600 only if:

• The reclaim is being made on the tax return for the same accounting period in which the loan was taken out
• The reclaim is being made within 2 years of the end of the accounting period during which the loan was taken out

In the majority of cases, the tax return for the accounting period in which the loan was taken out will have been filed before the Corporation Tax reclaim is made.

In this situation, or where the reclaim is being made 2 years or more after the end of the accounting period when the loan was taken out, form L2P must be filed to action the reclaim.

Form L2P is not filed with the CT600 tax return and is instead completed and submitted online via HMRC’s government gateway. A postal version of form L2P is also available.

Form L2P can be found here.

Loans made in a previous period are not reported on parts 2 and 3 of the CT600A and HMRC have validation rules that cause eFiling rejections when a prior period loan is reported on part 2 or 3 of the CT600A.

Note: The option of the 9 months paid within the chargeable period and after 9 months of the chargeable period are in the worksheet sorely for the loans where a reclaim is actioned through the tax return as it impacts the current year computation and relief due. However, for loans made in a prior period, a reclaim is either actioned on the prior year return or on form L2P, so a distinction between more/less than 9 months does not impact the current year computation.