HMRC allege that the tax gap is currently £14.7 bn and that small businesses represent 60% of the overall tax gap.

HMRC’s consider that the risks for SME businesses are:

• under-reported income and over-claimed expenses
• error and evasion in transactions that occur between a company and its owners

HMRC are part way through a consultation aimed at changing the way in which transactions between directors / shareholders and their companies are reported.

Changes have already been made to self-assessment tax returns meaning that with effect from 6 April 2026, directors of close companies must provide enhanced reporting on their Self-Assessment Tax returns.  

Any change in reporting is likely to make it easier for insolvency practitioners to identify and bring claims against directors as the information relating to the connected party transactions will have already been provided to HMRC.