If you are a director of a close company, there is an important reporting point that should not be overlooked when completing your Self-Assessment tax return. 

HMRC now expects greater transparency around directorships, even where no income has been taken from the company. This is an area where we are seeing confusion, so it is worth setting out what is required – and why it matters.

What is a “close company”?

In simple terms, a close company is one that is controlled by five or fewer participators, or by its directors. Many owner‑managed businesses fall squarely into this definition.

If you are a director of a close company at any point during the tax year, you must declare this on your personal tax return.

Importantly, this applies regardless of whether you are paid a salary or receive dividends.

What information must be disclosed?

Where you are a director of a close company, your tax return must include the following details:

• The name and registered number of the close company
• The amount of dividend income you received from that company during the tax year (if any)
• Your percentage shareholding in the company

If your shareholding changed during the year, HMRC requires you to report the highest percentage held at any point in that tax year.

HMRC’s guidance also confirms that the percentage shareholding should be calculated by reference to the nominal value of the shares, not their market value – a technical point that can easily be missed.

Why does this matter?

On the face of it, this may feel like another administrative box‑ticking exercise. However, inaccurate or incomplete disclosure can lead to:

• HMRC enquiries
• Delays in processing your return
• Potential penalties for incorrect information

We are also seeing HMRC using this data to build a clearer picture of owner‑managed businesses, particularly where there may be loans to directors, dividend planning, or changes in ownership.

Common pitfalls we see

Some of the most frequent issues we come across include:

• Directors assuming disclosure is not required because no dividends were paid
• Forgotten or dormant companies not being reported
• Incorrect shareholding percentages where shares were transferred during the year
• Confusion between nominal value and actual value of shares

These are easy mistakes to make – but equally easy to avoid with the right advice.

What should you do next?

If you are a director of a close company, now is a good time to:

• Review all current and past directorships during the tax year
• Confirm shareholdings and any changes made
• Ensure your Self-Assessment return includes the correct disclosures

If you are unsure whether a company is “close”, or how your shareholding should be calculated, this is exactly the sort of area where tailored advice makes a difference.

If you would like us to review your position or help with your tax return, please get in touch with the Wem team – we would be happy to help.