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HMRC Drops Plan for Close Companies to Report Every Payment to Directors and Shareholders

The government said on 28 October 2026 that it will not introduce new rules requiring close companies to report transactions with their participators, such as dividends, loans and asset transfers, after 1,001 consultation responses showed many small companies already struggle with existing obligations.

By Entrepreneur Group · Published 31 October 2026

The government will not introduce new rules requiring close companies to report their transactions with directors and shareholders to HMRC, it confirmed on 28 October 2026 alongside the Autumn Budget. HMRC's consultation outcome says: "The government will not implement the new reporting requirements at this time."

For most owner-managed limited companies, this removes a proposed extra layer of reporting on dividends, loans and other payments to the people who run and own them.

What was proposed

HMRC opened the consultation, Reporting company payments to participators, on 19 March 2026, and it closed on 10 June 2026. It covered close companies, which are broadly companies controlled by five or fewer participators, or by any number of participators who are directors. The consultation said the vast majority of close companies are small.

The proposal would have required companies to report transactions with participators, including:

• cash withdrawals, bank transfers and other payments;
• loans, debts, repayments, and loans released or written off;
• dividends and other distributions;
• sales and purchases of assets between the company and a participator;
• any other transfer of value.

Salary already reported through PAYE Real Time Information would have been excluded. Each report would have included the recipient, the amount and the date, along with details such as a National Insurance number so HMRC could check the figures against the person's Self Assessment return. HMRC's preferred approach was an annual report tied to the Company Tax Return.

HMRC's reason was the size of the small business tax gap. The consultation said small businesses account for 60% of the overall tax gap, and put the small business Corporation Tax gap at £14.7 billion, or 40.1% of their theoretical liability, in 2023 to 2024. It said blurred boundaries between company money and the owners' money drive both mistakes and deliberate non-compliance.

Why it has been dropped

The summary of responses says HMRC received 1,001 written responses: 579 from businesses, 184 from individuals, 169 from agents, 18 from representative bodies and 51 others. "The majority of respondents were negative about the proposals on the grounds of increased costs and burdens," it says, while advisers were generally more positive.

The response also found widespread confusion about the current rules. It says "nearly all respondents" stated that the close company definition and the obligations on directors' loan accounts were not well understood. The government concluded that "companies are struggling to meet their existing reporting obligations" and that "more consideration needs to be given to embedding fundamental tax obligations in the smallest companies" before more reporting is considered.

ICAEW's Budget summary lists the decision among the measures affecting businesses, describing it as "confirmation that the government will not proceed with new reporting requirements for close companies".

What happens next

The decision is "at this time", so the idea could return. HMRC says it is building up simple guidance on GOV.UK, including on taking money out of a company, and that the government will consider the feedback in its call for evidence on modernising the administration of Corporation Tax.

What directors should do

This section is editorial guidance, not tax or legal advice.

• The existing rules still apply. Dropping the new reporting does not change the tax treatment of directors' loans, dividends or benefits, which still need to be recorded and reported correctly.
• Keep company and personal money separate. HMRC has made clear this is the risk it is worried about. Clear records of every withdrawal and its purpose protect you if HMRC asks questions.
• Review your director's loan account. If you have taken money out that is not salary or a properly declared dividend, check the balance with your accountant before your year end.
• Read HMRC's guidance. Since HMRC found many directors do not understand the close company rules, it is worth checking that you do.

Frequently asked questions

Do close companies have to report payments to directors to HMRC?

Not under any new regime. On 28 October 2026 the government said it will not implement the proposed requirement for close companies to report transactions with participators, although existing reporting obligations still apply.

What is a close company?

A close company is broadly a UK company controlled by five or fewer participators, or by any number of participators who are directors. HMRC says the vast majority of close companies are small.

Why did HMRC drop the close company reporting proposal?

HMRC said consultation responses showed companies are struggling to meet their existing reporting obligations, and most of the 1,001 respondents opposed the plan because of extra costs and burdens.

Sources

1. HMRC: Reporting company payments to participators, consultation outcome (28 October 2026) (reviewed 31 October 2026)
2. HMRC: Reporting company payments to participators, modernising the reporting framework (19 March 2026) (reviewed 31 October 2026)
3. HMRC: Reporting company payments to participators, summary of responses (28 October 2026) (reviewed 31 October 2026)
4. ICAEW: Budget measures affecting businesses (October 2026) (reviewed 31 October 2026)