The Revenue Commissioners have confirmed to the ICAI that income tax is not payable on loans to participators for preliminary tax purposes or in the balance of tax due on filing the tax return provided the loan is repaid before the filing deadline.

Revenue's eBrief No. 56/2007 stated that a close company does not have to take account of the loans to participators provisions in relation to the charge to income tax for preliminary tax purposes where the participator or associate of the participator repays the loan/advance by the due date for filing of the company's corporation tax return. Revenue have now clarified that if the loan is repaid before the filing deadline, the company does not have to account for any tax on the loan when making its preliminary tax payment nor when paying the balance of its corporation tax liability on the return filing date. However, the CT1 return should reflect details of directors’ loan accounts as required in Panel 1 of the 2008 return form.

The practice set out in the eBrief and the clarification issued by Revenue should be relied upon only to the extent that the loan arrangements concerned are undertaken in good faith and for purposes other than tax avoidance.

See Section 1.05 of the December 2007 issue of tax.point for commentary on eBrief No.56/2007.