tax question

S455 and Unpaid Share Capital

Tax Question

I am preparing accounts for a new client Company which has a sole director/shareholder. In reviewing the records I can see that the shareholder hasn’t paid for the £1000 £1 shares that were subscribed for. Will the unpaid amount of share capital be treated as a loan to a participator and attract a tax charge under CTA2010 s455?

Tax Answer

It used to be HMRC’s view that a s455 tax charge would apply on an issue of shares by a close company where the shares are issued ‘called up’ but remain wholly or partly unpaid as there was a debt from the shareholder to the company.

However, in 2014 there was a case that went to the First Tier Tribunal and it was found that the unpaid liability was not a debt to be repaid on money that had been borrowed, it was a liability to be paid to honour an investment promise so no s455 charge would be due.

HMRC do take the view that there is still some scope under circumstances where it is deemed that a participator (or associate of) has used unpaid share capital to extract profits or other value from the company without a tax charge. They have updated their guidance following the RKW Ltd v HMRC case and full details can be found in their Company Taxation Manual at CTM61537 ( This guidance also touches on a point with regards to the introduction of Targeted Anti-Avoidance Rules.

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