A close company can reclaim section 455 tax once the loan that triggered it is repaid, released or written off. If that happens within nine months of the end of the accounting period in which the loan was made, the tax is never payable at all. If it happens later, the refund cannot be given until nine months and one day after the end of the accounting period in which the repayment, release or write off took place.

What is section 455 tax and why can it be refunded?

Section 455 of the Corporation Tax Act 2010 charges a close company extra tax when it lends money to a participator (usually a shareholder director) or an associate of one. The rate is tied to the dividend upper rate for the tax year in which the loan is made. HMRC’s director’s loans guidance gives 33.75% for loans made on or after 6 April 2022 and 32.5% for earlier loans. Section 8(2) of the Income Tax Act 2007, as amended by the Finance Act 2026, sets the dividend upper rate at 35.75% from the 2026 to 2027 tax year, so a loan made on or after 6 April 2026 is charged at 35.75% even though some HMRC guidance pages still quote the older figure.

The charge is due on the day after the end of the nine month period following the end of the accounting period in which the loan was made, the same date as the company’s main corporation tax. It is not a permanent tax. Section 458 gives the company relief from the charge, or a proportionate part of it, when the loan is repaid or the debt is released or written off. For the background on who counts as a participator, see our guide to close company rules and the overview of director’s loan accounts.

When is the tax refunded after the loan is repaid?

Timing depends on when the repayment happens relative to the nine month due date, as HMRC explains at CTM61610.

When the loan is repaid, released or written off What happens to the section 455 tax
Before the end of the accounting period Nothing is outstanding at the year end, so no charge arises for that period (unless the bed and breakfasting rules apply)
After the year end but within nine months of it Relief is available straight away, so the tax does not have to be paid
Nine months or more after the year end The tax must be paid on the due date. Relief is deferred by section 458(5) until nine months after the end of the accounting period in which the repayment occurs

In the third case HMRC’s online claim guidance is explicit: you cannot claim until nine months and one day after the end of the accounting period in which the loan was repaid, written off or released, and no repayment will be made before then. Late payment interest on the section 455 tax stops running on the date the loan is repaid, not the date relief becomes due, but any interest already charged is not refunded.

What counts as a repayment?

HMRC’s guidance at CTM61600 to CTM61605 sets out where the line falls.

  • Cash. Payment by a third party on the director’s behalf can also count.
  • Book entries. Accepted if they reflect a real transaction and are properly recorded, but the repayment only happens on the date the entries are made.
  • Salary or bonus credited to the loan account. Can count, following the rules on when earnings are paid.
  • Dividends. A dividend only repays the loan when it is actually paid. A dividend that has been declared but not paid leaves the debt outstanding.
  • Moving the debt to another company. Not a repayment. HMRC relies on Collins v Addies to say that swapping the original debtor for a group or associated company does not repay the lender, and it challenges arrangements that shuffle balances between companies.

Where several loans sit on one account, the parties can say which debt a repayment clears. If they do not, HMRC applies the earliest debt first. A repayment followed quickly by new borrowing may also be reallocated under the 30 day and arrangements rules, covered in our page on director loan repayments and the 30 day rule.

What if the loan is written off instead of repaid?

A release or write off also gives the company relief under section 458(2)(b), but the cost moves elsewhere. Section 415 of the Income Tax (Trading and Other Income) Act 2005 charges income tax on the participator when a loan that was within section 455 is released or written off. HMRC’s guidance also says Class 1 National Insurance must be deducted through payroll where the loan is written off or released. On the company side, section 321A of the Corporation Tax Act 2009 stops any loan relationship debit for the amount written off, so the company gets no deduction for the lost money. A write off therefore swaps a refundable company tax for a permanent personal one.

How do you claim: CT600A or form L2P?

HMRC’s guidance splits claims by how long after the loan year they are made.

  • Within two years of the end of the accounting period in which the loan was made. Claim on the CT600A supplementary page when preparing the Company Tax Return for that period, or by amending it online.
  • Also within two years, but using a different route. Use form L2P with the return if the return is for a different accounting period from the one in which the loan was made, or if you are amending the return in writing.
  • Two years or more after the end of the loan period. Fill in form L2P and either send it with the latest Company Tax Return or submit it separately.

The L2P claim can now be made online through a Government Gateway account, and agents need an agent services account. HMRC asks for the company’s Unique Taxpayer Reference, bank details, the start and end dates of both the loan period and the repayment period, the date and value of the loan and of each repayment, release or write off, and the date relief is due. HMRC then sends a revised calculation and repays the company.

If a loan is made and repaid within the same accounting period so that nothing is outstanding at the year end, HMRC says the loan does not need to go on the return at all. That shortcut does not apply where the repayment was temporary and the money was borrowed again.

Is there a time limit for the claim?

Yes. Section 458(3) requires the claim within four years from the end of the financial year in which the repayment, release or write off occurs. For tax purposes a financial year runs to 31 March, so a repayment made on 10 August 2027 falls in the financial year ending 31 March 2028 and the claim must be made by 31 March 2032. The limit runs from the repayment, not from the original loan. HMRC notes that the old six year limit applies only to repayments made in financial years ending before 1 April 2010.

How does this work in practice?

Illustration only. A company with a 31 March year end lends its shareholder director £40,000 in September 2025. Nothing is repaid by 31 March 2026, so the loan is reported on the CT600A for that year.

  1. The tax year of the loan is 2025 to 2026, so the charge is 33.75%: £13,500.
  2. The director has still not repaid by the nine month point, so £13,500 is payable on 1 January 2027 with the main corporation tax.
  3. The director repays the full £40,000 on 10 August 2027, which falls in the accounting period ending 31 March 2028.
  4. Relief is not due until nine months after 31 March 2028, so the earliest claim date is 1 January 2029.
  5. That is more than two years after the end of the loan period, so the claim goes in on form L2P.

Interest on the £13,500 runs from 1 January 2027 until the repayment on 10 August 2027 and is not refunded. HMRC’s manual notes that directors sometimes shorten an accounting period to bring the relief date forward, which can be relevant where a company is being closed.

What mistakes delay or lose the refund?

  • Claiming too early. HMRC will not amend the self assessment until relief is due, so an early claim simply waits.
  • Counting a declared dividend as repayment. Only payment clears the debt, and the date of payment is the date that counts.
  • Borrowing the money straight back. The repayment may be matched against the new loan instead, leaving the original charge in place.
  • Repaying during a liquidation without an accounting period. Relief can only be given for a repayment made in an accounting period, which can trip up companies being wound up. See our guide to closing a limited company.
  • Missing the four year limit on an old loan that was cleared years ago but never claimed.
  • Forgetting the personal side. A loan over the beneficial loan threshold may also create a benefit in kind; see benefits in kind and form P11D.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.