How do I reclaim tax paid on loans to participators that have been repaid?

If you’re a close company that’s previously paid tax on a loan to a participator, you may be able to reclaim that tax. Once the loan has been repaid, released or written off partially or in full, usually the tax can be either offset against current corporation tax liabilities or repaid directly by HMRC if no corporation tax is due. The way the claim is made is dependent upon the length of time since the loan was issued. 

HMRC's guidance explains:

Reclaiming within 2 years of the end of the accounting period when the loan was taken out

Option 1: Amend the original return

Assuming the corporation tax return for the period in which the loan is taken out has already been filed, providing the loan was repaid within 12 months of the original filing deadline, an amended return can be filed on-line after completing the CT600A > Supplementary pages > Loans to participators > 'Is relief being claimed for loans made during the period that have been repaid, released or written off more than 9 months and one day after the end of the period?' and proceeding to complete section 3 of Loans to participators: "Claim relief for loans - after 9 months", where all relevant loan details can be entered. You do not complete these pages in the corporation tax return for the period in which the loan was actually repaid.

Option 2: Use form L2P 

If you do not have access to the original return, you can complete HMRC's form L2P and attach it to your current corporation tax return (as a pdf attachment if you are filing on-line). L2P forms can be sent to HMRC separately from the return but the repayment or credit of corporation tax will not be 'paid' until at least 9 months and 1 day after the end of the return period in which the loan was repaid, i.e. when the corporation tax for this period is due.

Please note: If you do fill out the Loan wizard then this will populate the details automatically onto the other pages within the Loans to Participators section, for the period in which the loan was actually taken out.

Reclaiming after 2 years

If you’re reclaiming 2 years or more after the end of the accounting period when the loan was taken out, fill in form L2P and either include it with your latest Company Tax Return or post it separately.

HMRC will repay your company by either:

• using the details you gave in your latest Company Tax Return
• sending a cheque to your company’s registered office address

In order to include this within "your latest Company Tax Return", you would need to complete the form online and save this in PDF format before being able to attach this onto the return. Once you have the document you can click on CT600 > Attachment Management > Add Other PDF.