Close Company Reporting

Close companies (often small, family-run businesses) have come under recent scrutiny with additional reporting requirements in place for directors and further reporting changes potentially on the horizon.

Broadly, a close company is a UK resident company controlled by its directors or by five or fewer participators (eg shareholders or loan creditors).

HMRC wants more information about close companies in a bid to achieve greater transparency and close the small company tax gap.

This article sets out the relevant changes.

Director Reporting Requirements

For the 2025/26 tax year onwards^[1], a close company director will need to provide certain information in their Self-Assessment Tax Return on the close company and their interest in it ^[2].

When completing the supplementary Employment pages (SA102), a close company director will be required to confirm that they were a director during the relevant tax year and that the company was close.

In addition, the director will need to provide the following:

• the name of the company;
• the company registration number;
  
• the amount of dividend income received from the company in the relevant tax year (even if it was nil); and
• their percentage shareholding in the company (even if that percentage is zero) based on the nominal value of the shares and irrespective of any differences in the rights attached to particular shares.  If the percentage changes during the tax year, the director will need to report the highest percentage owned in that year.

If the director holds more than one directorship, they will need to complete a separate SA102 for each one.

To ensure compliance, HMRC may impose a separate £60 penalty for each instance in which information provided is missing or incorrect.  Higher penalties may apply if, for example, this results in an inaccurate tax return or liability.

The new director reporting requirements only apply if an individual is already required to file a personal tax return – they do not create a new obligation to file a return.

Close Company reporting of transcations with participators 

HMRC launched a consultation on 19 March 2026 proposing to introduce mandatory reporting of transactions between close companies and their participators. The consultation, entitled “Reporting company payments to participators — modernising the reporting framework”, closed on 10 June 2026.

What are the proposed changes?

Transaction reporting

• Close companies would be required to report details of all transactions with participators (individuals or corporates), including payments via cash, bank transfer or otherwise, sales of assets to the company, purchases of assets from the company, dividends or other distributions, any other transfer of value from the company to the participator (including loans to participators).
•  The only anticipated exemption would be items already reported under Real Time Information (eg a salary to a director).

Collecting data

Required details would include the recipient, the amount, and date of each transaction.

Identifying information

Companies would need to provide participator details such as name, address, and National Insurance number to allow HMRC to cross-reference with personal tax returns.

Loan repayments, releases and write-offs

Reporting would extend to the repayment, release or writing off of loans to participators, enabling HMRC to track relevant Corporation Tax (CT) relief claims made by the company and Income Tax charges on the participator.  

Penalties

The normal CT penalty regime would likely apply, although HMRC is exploring whether bespoke penalties (eg for deliberate omissions) may be appropriate.

Commentary on the changes

Broadly, responses submitted by relevant professional bodies have not supported the "one-size-fits-all" proposals, given that businesses falling within the definition of a close company often vary considerably in size and resources.  Emphasis is placed on any new compliance framework being proportionate and capable of accommodating the variety of companies that may be affected by these proposals.

The industry responses also flag the risk of lower-quality reporting and technical errors should the further administrative burden and cost of these potential changes result in companies looking to dispense with professional advice and/or rely on AI to reduce costs elsewhere.

We now wait to see whether HMRC will proceed with the new reporting requirements and, if so, whether it will amend the proposals to take on board the responses received.

If enacted, the new reporting requirements would appear to represent a notable increase in the level of compliance expected of close companies.  It will therefore be important for close companies entering into transactions with their participators to maintain clear and contemporaneous records to keep on top of the additional reporting.

^[1] The online filing deadline for the 2025/26 tax year being 31 January 2027.
^[2] As introduced by the Income Tax (Additional Information to be included in Returns) Regulations 2025 – legislation which also introduced a requirement for individual, trustee and partnership returns to include the date on which a relevant business activity commenced or ceased in the relevant tax year.