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Director writes off a loan to their company: is the release taxable for Corporation Tax?

Last updated: 29 September 2026

Short version. If a director legally releases a cash loan owed by the company, the company may recognise a gain in profit and loss. The gain can affect Corporation Tax as a trading or non-trading loan relationship credit. A statutory exception may mean the company is not required to bring the credit into account. The company chooses the treatment for its return.

Why a release creates a credit

A loan from a director is a company liability. When the obligation ends, FRS 105 requires the company to remove the liability and recognise the resulting gain in profit and loss. A bookkeeping write-off alone does not end an obligation to repay. HMRC explains how trading and non-trading loan relationship credits enter the Corporation Tax calculation.

The accounts gain and the taxable credit are separate questions. A credit can appear in the accounts even if a statutory exception keeps it out of the tax computation.

When a credit is not brought into account

CTA 2009 section 322 applies to a release of a liability under a company debtor relationship in an accounting period where an amortised cost basis is used for that relationship. The company is not required to bring the release credit into account if one of conditions A to E applies. These cover a statutory insolvency arrangement, a qualifying exchange for ordinary shares or an entitlement to them, specified insolvency conditions where the relationship is not between connected companies, specified bank stabilisation or mandatory reduction powers, and the corporate rescue condition. Read the full conditions in section 322 before selecting a treatment.

The corporate rescue condition has detailed tests. Immediately before the release, and without the release and related arrangements, there must be a material risk that the company would be unable to pay its debts at some time in the next 12 months. The release must not be a deemed release or a release of relevant rights. Read our corporate rescue exemption explanation for the full wording and HMRC guidance.

Section 358 is a separate rule for connected companies. It does not apply just because an individual director owns shares. HMRC explains the corporate creditor boundary in CFM41080.

Worked example and common mistakes

Suppose a company has £3,000 turnover and £1,000 expenses. Its director releases a £6,000 cash loan and the whole amount is recognised as a profit and loss gain. Accounting profit is £8,000. If the company chooses a statutory exception that keeps the release credit out of account, the trading result before other adjustments is £2,000. The £6,000 is still shown in the accounts.

The CT600 PDF has no separate £6,000 waiver box. With no other tax adjustments or trading losses in this example, boxes 155 and 165 show the £2,000 taxable trading result. The tax computation PDF names the £6,000 gain within operating profit and shows a £6,000 deduction for the excluded credit. A taxable non-trading waiver would instead enter the combined loan relationship calculation, whose net profit may appear in box 170. See the step-by-step waiver guide for the filing fields and document check.

  • Calling a release a capital contribution does not, by itself, make the credit exempt.
  • Do not enter the gain again as Other income or CT600 box 205.
  • Enter the closing creditor balance after the release. Do not reduce it twice.
  • A debt-for-equity release recognised wholly or partly in equity needs a different accounting route. The #Simple CompanyTax waiver field records a release whose whole amount is a profit and loss gain.

#Simple CompanyTax lets a customer choose the statutory exception treatment for a qualifying profit and loss release. It does not decide whether the legal conditions are met.

Official sources