Company owners are being urged to check their personal tax affairs as a new compliance campaign focuses on transactions between limited companies and the people who control them. Loans, personal expenses and the use of company assets are among the areas attracting attention. Could you have overlooked a tax liability?
The campaign focuses on individuals registered at Companies House as persons with significant control (PSCs). Broadly, this means someone who holds more than 25% of a company’s shares or voting rights, can appoint or remove most of its directors, or otherwise exercises significant influence over the company. Being a PSC does not automatically create a tax liability. However, transactions between a company and its owners can have personal tax consequences that are easily overlooked, particularly where the company is owner managed. One common issue is the payment of personal expenses from company funds. For example, where a company pays for a director’s private expenditure, the amount must be properly accounted for. Depending on the circumstances, it could be treated as remuneration, a taxable benefit or a loan to the director.
Loans can create further complications. An interest-free or low-interest loan may result in a taxable benefit, while an outstanding loan to a shareholder can also trigger a separate corporation tax charge for the company. HMRC’s guidance on directors’ loans explains the different rules. Other potential problems arise where company assets are available for private use, assets are transferred between the company and its owners, or shareholders exercise share options or dispose of their shares. The new letter-writing campaign is targeting individuals identified through Companies House records. Recipients are being asked to review their 2025/26 Self-Assessment returns and establish whether any mistakes were made in earlier years. The letters are not formal compliance enquiries, but they warn that any errors subsequently identified by HMRC may be treated as prompted disclosures, potentially resulting in higher penalties.
Company owners should review their director’s loan accounts, personal expenses, benefits and transactions involving company assets before finalising their 2025/26 returns. Where mistakes have been made, the 2024/25 return can normally be amended, while earlier errors may need to be corrected through HMRC’s disclosure service. Anyone receiving a letter is being asked to correct any errors by 31 January 2027. Those satisfied that their returns are correct do not need to respond. However, reviewing the position now could prevent a relatively straightforward accounting mistake from becoming a more expensive tax problem.
