Close Companies: Take Care

In a busy day for tax reform, draft legislation has been published that removes an exception to the targeted anti-avoidance rule (TAAR) in the close company rules for arrangements made as of today. This is one of a number of announcements in support of the Government's stated objective of a "fair tax system".

The "loan to participator" rules are a long-standing set of rules designed to prevent closely controlled (e.g. owner-managed) companies deferring tax on dividends by making loans to shareholders instead. Fact patterns in scope of these rules range from simple to highly complex, and the changes announced today could make those examples at the more difficult end of the spectrum even more complex.