A close company may have a tax liability where it makes a loan to a participator. The amount and timing of any loan repayments made by the participator are important in determining if tax is payable, the amount due and whether the company can claim a repayment of tax paid earlier. Anti-avoidance rules apply to prevent so-called ‘bed and breakfasting’, including where the original loan is repaid and a new loan is made within a 30-day period. Details of loans and repayments are reported in the company’s tax return.

HMRC tool 

HMRC has published a tool which the company, its agent or a participator can use where HMRC has asked the company to confirm that loans made to participators were fully repaid by the dates shown on the company’s tax return. The person using the tool will also need to confirm that the company did not make any other loans to participators in the 30 days: 

• before the end of the accounting period; or
• after the official filing date.  

The tool should not be used to make changes to the company’s tax return. The company should amend its return in the normal way.  

For company tax returns submitted before April 2025, it was possible to claim relief where it was expected that a loan repayment would be made by a given date. In November 2025, HMRC wrote to agents and asked them to check that any expected loan repayments had been made and to help their clients amend their returns where necessary.  

Increase in the rate of tax 

For loans made to participators by close companies on or after 6 April 2026, the rate of tax is increased from 33.75% to 35.75%.  

HMRC says that its corporation tax online service will be updated for this change on 6 April 2027. Where a return that is affected by the change in rate is submitted before 6 April 2027, the company may need to amend the return after 6 April 2027 to reflect the correct rate of tax.  

New reporting obligation 

The government is consulting on a new requirement for close companies to report details of transactions with participators to HMRC, including the amount, date and details of the recipient for each transaction. The consultation closes on 10 June 2026. An earlier article explains how the proposed reporting obligation is expected to work and how to get involved in the consultation.