We have a company client which has a credit loan account with it's director. In other words the company owes its director the money. The shareholder of the company is a trust of which the same director of the company is also the trustee of the trust. She
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
Please note that the fact that the individual is a trustee of the trust is irrelevant for purposes of section 7C of the Income Tax Act. What is relevant in the first instance, for purposes of section 7C, is whether the individual is a connected person in relation to the trust. The same applies to the directors of the companies - you also mentioned that the directors are beneficiaries of the trust.
Section 7C(1), in its amended form, reads as follows:
This section applies in respect of any loan, advance or credit that—
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a natural person; or
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…,
directly or indirectly provides to—
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… ; or
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a company if at least 20 per cent of—
(aa) the equity shares in that company are held, directly or indirectly; or
(bb) the voting rights in that company can be exercised,
by the trust referred to in subparagraph (i) or by a beneficiary of that trust.
You therefore need to determine two things:
1. Whether the individual is a connected person in relation to the trust.
2. Whether the trust, or a beneficiary of the trust, holds shares (20%) or can exercise voting rights in the company.