What the Close Company Consultation Means for Your Business

If you run one of the UK’s 5.7 million small firms, listen up. A consultation is currently open until 10th June that proposes all small businesses become ‘Close Companies’.

Keep reading to find out more and to learn how this could impact your business operations if the consultation is successful.

What Is the Close Company Consultation?

There’s no hiding from the fact that HMRC is putting measures in place to strengthen reporting for all UK companies and sole traders. The latest proposed change comes in the form of the Close Company Consultation. 

Close companies are normally registered as limited companies and have five of less shareholders. Most commonly, family-run and owner-managed businesses fall into this category. To ensure these organisations have increasing transparency, HMRC are proposing that impacted businesses report transactions more regularly. This would mean businesses would need to report financial movements that are currently only included in bookkeeping or year-end accounting. Examples of transactions this would impact include dividend payments, asset transfers, and director loans.

How Will Close Company Consultation Impact Businesses?

If the proposed changes come into force, affected businesses will need to adjust all financial processes. Impacts will be as follows:

• More Admin: Whereas currently, lots of transaction reporting can be summarised at year-end, under the changes, this information would need to be recorded and potentially reported continually. There could also be some duplication between information required for corporate tax returns or self-assessment tax returns. Finally, more reporting increases the chance of errors or inconsistencies, which poses risks for small businesses as any mistakes can lead to fines from HMRC.
• Compliance Focus: It’s not just admin that would need to be changed, but also the approach to company compliance. Businesses will need to ensure accurate reporting is maintained, which could end up distracting from daily operations. Additionally, becoming compliant could mean a rise in costs. This could be in the form of needing to bring new people in to manage the process or simply investing in compliant software.
• Financial Forecasting: More focus will also need to be placed on forecasts to ensure any financial movements are planned in advance.

What Can Businesses Do Now to Prepare for Close Company Consultation?

If you feel passionately about these proposed changes, why not have your say? Businesses have until the 10th of June 2026 to submit their comments. Simply click this link to visit the HMRC website to learn more.

It’s also important for impacted companies to start preparing now for potential changes. While there will be notice period before any changes come into place, being organised is the best way to manage the situation. It’s essential that companies:

• Identify areas of reporting that currently rely on manual processes
• Implement strong business planning 
• Speak with your accountant to understand how this could impact your business
• Keep a handle on consultation developments to understand the likelihood of the changes coming into force

Change can be scary, but it’s not always bad when managed the correct way. If you would like some advice or help navigating the Close Company Consultation, get in touch with our team.