The move is designed to target the enormous £14.7bn small business tax gap, which hit a record high in 2024, representing 40% of small business corporation tax liability.

The proposals to clamp down on potential abuse of close company loans to participators will affect owner managed businesses and small companies although HMRC has not put a figure as yet on the number likely to be affected by the rule change. Likewise there is not a timetable for the changes, although it is likely to be introduced quickly as it is part of the government’s wider anti tax avoidance strategy.

HMRC pointed to a ‘a failure to distinguish between the company’s and the participator’s monies’, adding ‘the level of control allows close companies to easily structure their affairs to minimise the tax charge on participators, ranging from benign planning to aggressive avoidance’. 

The consu