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Shareholder loans: Article 81O(4) exclusions

Withdrawn concession

The concessional treatment whereby the shareholder loan provisions are not applied to a loan advanced at a commercial rate, regardless of the nature of the company making the loan, is withdrawn from 28 March 2014.


The shareholder loan provisions were introduced in Income Tax Amendment No. 29 and broadly have effect from the 2009 year of assessment.

They were introduced alongside the shareholder taxation provisions and their purpose is to ensure that shareholders cannot gain an advantage by deferring a tax liability by extracting value from their company via a loan rather than through taxable remuneration.

Whilst the shareholder taxation rules have been repealed (as of 1 January 2012) and replaced with the new distribution rules (effective from 1 January 2013), the shareholder loan provisions have been maintained throughout and were in fact extended from 1 January 2012 to include loans to shareholders from their investment companies.


The relevant provision is Article 81O of the Income Tax (Jersey) Law, 1961. 

The part of the provision to which this note relates is paragraph (4), which sets out loans and debts that shall not be shareholder loans.

Specifically, part (a) of the paragraph reads as follows;

(4) However, the following loans and debts shall not be shareholder loans -

(a) a loan advanced at commercial rate where -

(i) the ordinary business carried on by the company includes money lending, and

(ii) the company is authorised, pursuant to an enactment, to carry on a business which includes money lending;

Comptroller's practice to date of this statement​

Prior to the date of this statement, the comptroller's applied practice has been to accept that a loan from a company to a shareholder that has been advanced at a commercial rate was not a shareholder loan irrespective of whether of not the conditions set out at (i) and (ii) were met.

It follows that, as both conditions in (i) and (ii) are necessary for taxpayers to benefit from its provisions, Article 81O(4)(a) has not been applied correctly.

Comptroller's revised practice from the date of this statement

With immediate effect, the above practice shall cease to apply in respect of any future loans, except when a loan and all of its terms and conditions were agreed in writing prior to 28 March 2014. 

Article 81O(4)(a) will be applied according to its correct legal interpretation.


This statement of practice is without prejudice to the comptroller's right to review the full terms of any loans made, paid or derived from a company before the date of this statement, or any other like relevant matter, to determine whether or not there was a loan and whether that loan was advanced at a commercial rate.

It is likewise without prejudice to any arguments that might be made under Article 134A.  ​​

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