HMRC proposes wider reporting requirements for close companies

HMRC has published a consultation proposing significant changes to the reporting obligations for close companies. If implemented, the new rules would require companies to report a much wider range of transactions with their participators, reflecting HMRC’s continued focus on improving tax transparency and reducing non-compliance.

The consultation, published on 19 March 2026, forms part of HMRC’s wider efforts to tackle the small business corporation tax gap, which it believes has been driven in part by the blurring of company and personal finances. Under the current regime, reporting is largely limited to situations where a section 455 tax charge arises on loans to participators. HMRC considers this approach too narrow, as it provides little visibility over many other transactions between close companies and their owners.

Under the proposals, close companies would be required to report a broader range of transactions, including loans, cash payments, dividends, asset transfers, loan repayments and loan write-offs. For each transaction, companies would be expected to provide information such as the identity of the participator, the value of the transaction and the date it took place. Although HMRC’s preferred approach is annual reporting alongside the corporation tax return, more frequent reporting has not been ruled out.

While the proposals are primarily aimed at owner-managed businesses, their impact could extend much further. Many privately owned groups and private equity-backed businesses also fall within the definition of a close company and could face a significant increase in compliance obligations. In particular, reporting requirements for intra-group transactions may create additional administrative burdens and could overlap with other reporting regimes, including the International Controlled Transactions Schedule.

The consultation also leaves a number of important questions unanswered, including how the new rules will apply to group structures, partnership-owned businesses and existing exemptions within the loans to participators regime. Businesses that may be affected should monitor developments closely, as the final rules could represent a substantial change to the reporting framework for close companies.