Owner‑managed businesses could face significant new HMRC reporting obligations

HMRC consultation on reporting transactions between close companies and participators

HMRC is considering new reporting requirements for transactions between companies and their owners. While nothing has been finalised, the proposals could represent a significant change for many companies, including owner‑managed and family businesses.

If you take drawings, receive dividends, or use a director’s loan account, these changes could mean keeping more detailed records and reporting more information, potentially more frequently, to HMRC.

Proposed HMRC reporting requirements for transactions with company owners

The government has recently consulted on introducing new reporting requirements for ‘close companies’, under which businesses would provide HMRC with more detailed information about transactions with their ‘participators’.

A ‘close company’ is broadly one controlled by five or fewer participators, or by any number of participators who are also directors.  This means many owner‑managed and family businesses, including larger privately owned companies, fall within the definition.

A ‘participator’ is broadly a shareholder or loan creditor of the company (excluding banks and other lenders acting in the ordinary course of their business).

Under the proposals, businesses would need to report transactions such as:

• Payments to participators (for example, drawings or bank transfers)
• Loans and debts between the company and its owners
• Dividends and other distributions
• Sales and purchases of assets between the company and its participators
• Other transfers of value involving participators

For each transaction, this could include details such as the amount, date and recipient.

Existing HMRC reporting requirements for close companies and participators

There are already tax rules and reporting requirements that apply to transactions between companies and their owners. For example, loans to participators can trigger a tax charge for the company if not repaid within nine months of the end of the accounting period in which they are made, and benefits in kind rules may apply where loans are provided on favourable terms.

Companies and individuals also have to report relevant information through corporation tax returns, P11Ds and self‑assessment. This includes a new requirement from the 2025-26 tax year, under which directors must provide additional details in their personal tax returns about each close company they are involved in, including information on shareholdings and dividends.

These existing rules mean HMRC already receives information on how value is taken from companies, and the proposals would build on this by requiring more detailed and potentially more frequent reporting.

How proposed HMRC reporting changes could impact business processes

Many businesses already keep records of these transactions, but often only fully review them as part of the year‑end accounts and tax process.

For example:

• A director may take drawings during the year, which are later treated as salary, dividends or a loan balance
• A loan to a shareholder may be repaid before the nine‑month deadline to avoid a tax charge
• Transactions recorded in a director’s loan account may be analysed and adjusted at the year end

This is an established and practical workflow. The proposals could require businesses to capture and report this information earlier, in more detail, and potentially more frequently.

What the proposed HMRC reporting rules could mean for your business

If introduced, the changes could result in:

More detailed record‑keeping

Transactions may need to be tracked as they happen, rather than reviewed at the year end

Additional information requirements

Businesses may need to collect more identifying details about shareholders and directors than they currently hold

System and process changes

Existing accounting systems may not be set up to capture and report data in the way envisaged

Increased compliance burden

Transactions between the company and its owners may need to be reported in more detail, either through existing returns or new reporting requirements

HMRC close company reporting requirements consultation: next steps

The consultation has now closed and the government is reviewing responses.

We have responded to the consultation, highlighting the practical challenges for businesses and the potential compliance burden. You can read our full response here.

However, the direction of travel suggests HMRC is looking to build a more detailed picture of how funds move between companies and their owners.

How businesses can prepare for potential HMRC reporting changes

Although there is no immediate action required, it would be sensible to:

• Ensure director’s loan accounts are clearly maintained
• Keep good records of transactions between the company and its owners
• Be aware that reporting requirements may increase in future

Close company reporting and tax compliance: how Saffery can help your business

Saffery advises businesses and their owners on the tax treatment and reporting of transactions between companies and participators.

We can help you understand how current and proposed requirements affect your reporting obligations, review your processes and prepare for potential changes.

If you would like to discuss the consultation or your reporting and compliance obligations, please speak to your usual Saffery contact or use this form to get in touch.