In March 2026, the government published a consultation document seeking views on proposals for close companies to report details of transactions with participators to HMRC. The government said that the new reporting requirement was necessary to prevent “error and evasion” and to reduce the small business tax gap. Further details are provided in an earlier article.

In its response to the consultation (to be published on the tax representations webpage in due course), ICAEW has warned that the proposals would impose a disproportionate administrative burden on compliant businesses while doing little, if anything, to reduce the small business tax gap.  

The government’s proposals appear to be part of a trend towards large-scale data collection by HMRC. Although ICAEW recognises that having some additional information could assist HMRC, it is concerned that businesses may incur significant administrative costs in compiling information only for HMRC to lack the resource capacity to make good use of it. 

ICAEW believes that reducing the small business tax gap requires a credible risk of HMRC enquiry, supported by targeted and proportionate compliance activity undertaken by appropriately trained HMRC staff. Such activity should focus on high-risk behaviours rather than volume-based data collection and should minimise disruption for compliant businesses. ICAEW believes that meaningful compliance interventions are more likely to address deliberate non-compliance and the hidden economy than the measures proposed in the consultation. 

Overall, ICAEW considers that the proposals are inconsistent with the government’s growth agenda and would place unreasonable additional administrative demands on businesses, particularly smaller companies. As stated in ICAEW’s Autumn Budget 2025 representation, doing business in the UK is too uncertain, too difficult, and too expensive.