S455 Tax Journal Entries: Recording, Paying, Refunds, and Write-Offs

S455 tax journal entries sit entirely on the balance sheet: at year-end you debit an s455 tax asset and credit corporation tax payable for 33.75% of the outstanding loan, you clear the payable against bank when you remit the tax to HMRC, and you reverse the asset against bank when the refund arrives after the director repays. Nothing touches the profit and loss account, because the money is recoverable once the underlying loan to the participator is settled.¹

Why the Entries Stay on the Balance Sheet

The s455 charge is not an expense. It is a refundable deposit with HMRC that the company will recover once the loan is repaid or written off.² Routing it through the P&L would understate profits in the year the loan arose and then create a matching credit when the refund lands years later, distorting two sets of accounts to no useful end. Keeping it as an asset preserves an accurate view of trading performance and makes the money owed by HMRC visible to shareholders and lenders.

The rate is 33.75% for loans made on or after 6 April 2022, mirroring the dividend upper rate written into Section 8(2) of the Income Tax Act 2007.¹ Loans made before that date were charged at 32.5%. The tax bites on new loans or advances made in the period that remain outstanding nine months and one day after year-end, not on the total balance carried forward from prior years on which s455 has already been accounted for.³

Recording the Charge at Year-End

At the balance sheet date, once you have identified the loans that remain outstanding and calculated the charge, post the following:

Debit: S455 Tax Asset (balance sheet, often coded under “Other Debtors” or a dedicated s455 receivable) for the amount you expect to recover from HMRC.
Credit: Corporation Tax Payable (balance sheet, current liabilities) for the same amount.

For a £20,000 loan outstanding at 31 March 2026, the entry is a debit of £6,750 to the s455 tax asset and a credit of £6,750 to corporation tax payable. That figure must match exactly what you report on supplementary form CT600A filed with your main corporation tax return.⁴ A mismatch between the accounts and the return can trigger a reconciliation request in a compliance check.

Tag the asset with the accounting period it relates to and the participator whose loan generated it. When you come to claim the refund years later, that trail is what tells you which entry to reverse.

Paying HMRC

The s455 tax is due nine months and one day after the end of the accounting period, the same date as mainstream corporation tax.⁵ For a 31 March 2026 year-end, that date is 1 January 2027. It is usually remitted in a single payment alongside the rest of the corporation tax liability.

When you make the payment:

Debit: Corporation Tax Payable, clearing the liability.
Credit: Bank, reflecting the cash going out.

After this entry the corporation tax payable account should show a nil balance for the s455 element. The s455 tax asset remains on the balance sheet as a debtor representing cash the company has deposited with HMRC. If the payment is late, HMRC charges interest at the standard corporation tax rate (7.75% as of January 2026), and that interest is not refundable when the underlying tax is later reclaimed.⁶ Late payment interest, when it arises, does go to the P&L as a finance cost.

Recording the Refund When the Loan Is Repaid

Relief under Section 458 is not automatic. The company must claim it, either by amending the CT600 for the original period or by making a standalone claim.² And the refund cannot be paid out until nine months and one day after the end of the accounting period in which the repayment occurred.⁵ A director who repays on 15 June 2026, where the company year-end is 31 March 2027, will not see the refund before 1 January 2028.

When HMRC processes the refund:

Debit: Bank, for the cash returned.
Credit: S455 Tax Asset, clearing the debtor.

If the participator has repaid only part of the loan, record a partial recovery in the same proportions and leave the remaining s455 tax asset on the balance sheet until the rest of the loan is settled.

The claim has a hard deadline: four years from the end of the financial year in which the repayment or write-off occurred.² Miss it and the money is gone. A simple schedule linking each loan to its s455 payment and its claim deadline stops assets quietly aging off the balance sheet unrecovered.

The Full Cycle Worked Through

Take a £30,000 loan made to a director during the year ended 31 March 2026, repaid in full on 1 August 2026.

31 March 2026, year-end provision. The loan is outstanding, so recognise the liability at 33.75%. Debit s455 tax asset £10,125; credit corporation tax payable £10,125.

1 January 2027, payment to HMRC. Debit corporation tax payable £10,125; credit bank £10,125. The payable clears; the asset remains.

1 August 2026, director repays the loan. This transaction falls in the year ended 31 March 2027. Debit bank £30,000; credit director’s loan account £30,000. No s455 entry yet, because the refund window has not opened.

After 1 January 2028, refund received. Debit bank £10,125; credit s455 tax asset £10,125. The asset clears and the cash comes back.

The gap between paying the tax and reclaiming it is the real economic cost of s455. In this example the company is out of pocket for about a year, and any late payment interest paid along the way is not recoverable.

When the Loan Is Written Off Rather Than Repaid

A write-off also triggers Section 458 relief, so the s455 tax asset follows the same recovery path once the claim is made. The difference is in the entry that clears the director’s loan account:

Debit: Profit and Loss (expense), for the amount written off.
Credit: Director’s Loan Account, clearing the receivable.

Note the boundary here. A write-off is taxable on the director as earnings, and the company must run Class 1 National Insurance through payroll on the written-off amount.⁷ Those payroll entries are separate from the s455 cycle and often make a write-off more expensive overall than paying the s455 charge and living with it.

When the Repayment Does Not Count

One trap will stop you posting the refund side of the cycle at all. Under Section 464ZA, if a participator repays £5,000 or more and takes out a new loan of £5,000 or more within 30 days on either side of the repayment, HMRC treats the repayment as if it never happened for s455 purposes. A separate arrangements rule can disregard a repayment even outside 30 days where the outstanding balance was at least £15,000 before the repayment and arrangements for further borrowing were in place.⁸

The bookkeeping consequence is that although the cash movement on the director’s loan account is recorded normally, no refund claim can be made and the s455 tax asset stays on the balance sheet. Before you post a credit to that asset, confirm the repayment is genuine for tax purposes and not caught by either rule.

1
Legislation.gov.uk. Corporation Tax Act 2010, Section 455
2
Legislation.gov.uk. Corporation Tax Act 2010, Section 458
3
HM Revenue & Customs. Company Taxation Manual – Close Companies: Loans to Participators and Arrangements Conferring Benefit on Participator: General
4
GOV.UK. Company Tax Return – Supplementary Page CT600A
5
LexisNexis. Loans to Participators
6
GOV.UK. HMRC Interest Rates for Late and Early Payments
7
GOV.UK. Directors Loans: If You Owe Your Company Money
8
HM Revenue & Customs. Company Taxation Manual – CTM61635