Reclaiming S455 Tax — The Ultimate Guide (How to Reclaim Section 455 Corporation Tax)

If the loan is repaid, released or written off, the company can claim repayment of the S.455 tax via HMRC’s L2P process or by amending the CT600A, depending on the timing.

Reclaim s455 Tax

What is Section 455 (S.455)?

Section 455 creates a temporary Corporation Tax charge on a close company when it makes a loan, advance or provides value to a participator (usually a director or shareholder) and the loan is outstanding beyond the deadline.

The purpose of S.455 is to prevent tax-free extraction of company cash through director loans.

The charge is paid by the company, but reclaimable once the loan is repaid, written off or released.

Who This Applies To

Close companies

Most small UK limited companies qualify as “close companies”, meaning they are controlled by:

• five or fewer participators, or

• any number of participators who are also directors.

Participators

A participator is usually a shareholder, director, or a family member/associate receiving value from the company.

If the company is close and the person receiving the loan is a participator, S.455 rules apply.

When S.455 Becomes Due & the Rate

Timing

S.455 becomes due if the loan remains outstanding 9 months and 1 day after the end of the accounting period in which the loan was made.

It is reported on the Company Tax Return (CT600) and paid alongside Corporation Tax.

Rate

For loans made on or after 6 April 2022, S.455 tax is charged at 33.75% of the outstanding loan amount.

Earlier loan dates may use historic rates (e.g., 32.5% or older rates).

How a Loan Can Be Cleared to Allow a Reclaim

A company becomes eligible to reclaim S.455 only when the loan is repaid, released, or written off.

Methods include:

• Direct bank repayment from the director/shareholder

• Set-off against dividends (properly declared and documented)

• Salary or bonus netting

• Loan write-off or release (may trigger personal tax consequences)

• Capital restructuring (specialist route — requires tailored advice)

Documentation must clearly support the method used.

How to Reclaim S.455 Tax — Step-by-Step

Step 1 — Confirm the repayment/write-off details

Gather and record:

• Date(s) and amount(s) repaid

• Bank statements showing repayments

• Director’s loan account (DLA) ledger

• Dividend vouchers (if used for set-off)

• Board minutes (if writing off or releasing)

Step 2 — Understand the timing rule

A reclaim is usually only payable 9 months + 1 day after the end of the accounting period in which the loan was repaid or written off.

Step 3 — Choose the correct reclaim route

Depending on timing:

A. Within 2 years of the accounting period end

Reclaim via a CT600 amendment and the CT600A supplementary pages.

B. More than 2 years after the accounting period end

Use HMRC’s L2P (Loans to Participators) reclaim form, typically submitted online or attached to the next CT600.

Step 4 — Complete the form and provide supporting evidence

For L2P:

• Provide company details, UTR, repayment dates, amounts, bank details for refund

• Ensure supporting documents are ready to supply if HMRC requests them

For CT600A:

• Amend the relevant return with updated S.455 figures

Step 5 — HMRC processing

HMRC may:

• Repay the S.455 tax to the company’s bank account

• Or offset the refund against any outstanding Corporation Tax liabilities

• Request further evidence if needed

• Take several weeks/months depending on workload

Step 6 — Keep records

Store all supporting evidence for at least 6 years.

Examples & Worked Scenarios

Example 1 — Full repayment

• Company year end: 31 March 2024

• Loan repaid: 20 July 2024

• Relief becomes available: 1 January 2026 (9m+1d after the year containing the repayment)

• Reclaim: via L2P or CT600A depending on timing

Example 2 — Partial repayments

If a loan is repaid in stages:

• You can reclaim S.455 proportionately

• Each repayment has its own reclaim timeline

• Keep a clear DLA ledger showing reduction dates

Common Pitfalls (and How to Avoid Them)

1. Assuming S.455 doesn’t apply because the loan was eventually repaid

2. Missing evidence (e.g., no bank records or dividend paperwork)

3. Using incorrect reclaim method (wrong form = delay)

4. Poor DLA bookkeeping causing disputes or HMRC delays

5. Ignoring tax consequences of write-offs for the individual

6. Expecting fast repayment — HMRC processing can be slow

Practical Checklist for a Smooth Reclaim

• Company UTR

• CT600 and CT600A pages (if previously filed)

• DLA ledger

• Bank statements showing repayments

• Dividend vouchers (if used to clear loan)

• Board minutes for write-offs

• L2P or CT600 amendment details

• Company bank account for HMRC repayment

• Repayment schedule (dates and amounts)

FAQs

When can a company reclaim S.455 tax?

When the loan is repaid, released or written off. Reclaim becomes payable once the statutory waiting period has passed.

What form is used to reclaim S.455?

Use CT600A/CT600 amendment within the 2-year window, otherwise use the L2P reclaim form.

How long does HMRC take to repay?

There is no fixed timeframe. Allow several weeks to several months. HMRC may request evidence.

How far back can you claim?

Usually up to 4 years from the end of the accounting period in which the repayment occurred.

Can the refund be offset?

Yes. HMRC may offset the S.455 reclaim against outstanding Corporation Tax.