In an unusual move, the Chartered Institute of Taxation (CIOT) has written directly to HMRC after members reported problems with compliance with the rules on participator loans relating to due diligence on commercial share acquisitions, typically in buyout scenarios where a company lends cash to its parent company, referred to as ‘upstream loans’.  

The problems are caused by section 459 of Corporation Tax Act 2010 (CTA 2010) in commercial situations where no tax avoidance is involved, and the way HMRC interprets the legislation in its guidance in the CTM615501 manual.