A new tax year is starting soon, and with it come new disclosure requirements for business owner-managers.

Directors of close companies

The first new requirement concerns directors who receive dividends from close companies. A close company is, very broadly, one where five or fewer shareholders are able to control the company, or all the shareholders are directors. Typically, many family businesses are close companies.

For 2025/26 onwards, an individual who is a director of a close company must declare this on their tax return. In addition the return must also include:

• The name and registered number of the close company; 
• The amount of dividends received from the close company, which must be declared separately from other dividends; and
• Details of the highest percentage of share capital held in the year.

The last element is the most challenging, and the ATT have called for detailed guidance to explain how the percentage should be calculated for different classes of shares, and how to disclose holdings with different voting rights, capital rights or dividend rights. 

Commencement and cessation

For 2025/26 onwards, where an unincorporated business starts or stops in the tax year, the taxpayer will be required to include the date of commencement or cessation.

Many people may be surprised to learn that these boxes were not already compulsory and in many cases very little extra work will be needed. However, care will be needed on those occasions where the relevant dates are not clear. For example, it can be difficult to determine a start date where the trade has emerged from a hobby, or the individual decides to wind down their business gradually. However, precise dates do matter, especially when future reliefs such as Business Asset Disposal Relief are in play, so it will be worth spending a little bit of time establishing the position. 

Penalties

Although the rules take effect from 6 April 2025, those affected will first notice the impact next year, when they come to complete their tax returns for 2025/26. If a taxpayer fails to supply this additional information on returns from that year onwards, they could be charged a £60 penalty for each failure.

This new penalty was introduced in Finance Act 2024. A new penalty was needed to cover situations such as this where the information requested is not strictly required for the purpose of calculating the amount of income tax and capital gains tax the taxpayer needs to pay, but HMRC have requested it nonetheless.

This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.  

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