SME Accounting News & Deep Dives: Reckless Tax Statements Row, Director Loan Charges Rise & CT Rates for 2026/27

Modern SME accounting workspace with a laptop, calculator and blank documents

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By Jessica | 21 August 2026

This week’s SME accounting news brings several important reminders for directors of growing limited companies. ICAEW has rejected HMRC’s proposed new criminal offence for reckless untrue tax statements, Corporation Tax rates for 2026/27 remain unchanged, and the charge on certain director loans has increased.

Late payment interest also remains high. Together, these developments show why accurate records, timely tax planning and the right adviser are becoming increasingly important for small and growing businesses.

1. ICAEW rejects proposed criminal offence for reckless tax statements

ICAEW has rejected the case for a new criminal offence covering recklessly making an untrue statement or declaration in relation to direct tax.

The proposal would apply to matters such as Income Tax and Corporation Tax. HMRC’s stated aim is to create a similar “recklessness” standard across direct and indirect taxes. However, ICAEW believes HMRC already has extensive civil penalties and criminal powers available.

In its August 2026 tax news coverage, ICAEW raised concerns about:

  • The lack of clear evidence that a new offence is needed.
  • The uncertainty around what “reckless” would mean in practice.
  • Poor interaction with existing penalties for careless, deliberate and fraudulent behaviour.
  • Potential overlap with existing criminal offences.
  • The risk that taxpayers may be deterred from making voluntary disclosures.

The proposal is not currently law. It remains a consultation-stage measure and would require legislation before it could take effect.

What could this mean for SMEs?

Small companies often rely on an external adviser to prepare accounts, tax computations and Corporation Tax returns. Internal finance teams may be small, with directors making decisions based on incomplete information or informal records.

That makes clear communication particularly important. If an expense, director loan, dividend or tax adjustment is uncertain, the decision should be discussed and documented before a return is submitted.

The practical message is not to avoid speaking to HMRC or delaying the correction of an error. It is to keep evidence showing that the company took reasonable care. A good business accountant UK owner-managers can contact should help with:

  • Reviewing unusual transactions before filing.
  • Keeping written explanations for tax judgements.
  • Identifying errors early.
  • Making corrections or disclosures where appropriate.
  • Separating genuine mistakes from deliberate non-compliance.

Clear documentation protects both the company and its accountant if a transaction is later questioned.

2. Corporation Tax rates for 2026/27 remain unchanged

The headline Corporation Tax rates for 2026/27 remain:

  • 19% for taxable profits up to £50,000.
  • 25% for taxable profits over £250,000.
  • Marginal relief for profits between £50,000 and £250,000.
  • A marginal relief fraction of 3/200.

These figures are reflected in the Deloitte TaxScape 2026/27 tax tables.

The thresholds relate to taxable profits, not turnover. A company with sales of £300,000 may still fall within the small profits rate if its taxable profits are below £50,000. Conversely, a highly profitable business with lower turnover may be within the marginal relief or main rate bands.

Calculator and blank financial folders representing Corporation Tax planning

Planning points for growing companies

A business approaching the £50,000 profit threshold should not make rushed decisions purely to reduce its Corporation Tax bill. Instead, directors should review:

  1. The timing of genuine expenditure
    Planned equipment, software or other investment may qualify for capital allowances. The timing and type of expenditure can affect the tax calculation.

  2. Associated companies
    The £50,000 and £250,000 limits can be divided where companies are associated. This is particularly important for groups, companies with common ownership and businesses that have recently reorganised.

  3. Profit extraction
    Salary, dividends, pension contributions and retaining profits in the company can have different Corporation Tax and personal tax consequences.

  4. Accounting periods
    Short accounting periods can affect the thresholds and the timing of tax payments.

  5. Cash-flow planning
    A lower tax rate does not remove the need to reserve cash for the liability. Corporation Tax is normally due nine months and one day after the end of the accounting period for companies that do not pay by instalments.

A company approaching the upper threshold should speak to corporation tax accountants early. Planning is more effective before the year end than after the accounts have been prepared.

3. Section 455 charge on director loans rises to 35.75%

From 6 April 2026, the Section 455 charge on qualifying loans or benefits made by close companies to participators increased from 33.75% to 35.75%.

This commonly affects owner-managed limited companies where a director or shareholder has an overdrawn director’s loan account.

The charge can arise where a close company lends money to a director-shareholder or another participator and the amount remains outstanding at the relevant Corporation Tax payment point. In broad terms, the loan should be cleared within nine months and one day after the end of the accounting period in which it was made to avoid the charge.

For example, if a company’s year end is 31 March 2027 and a qualifying loan is made after 6 April 2026, the company should review the balance carefully before 1 January 2028.

The rate applying to a loan depends on when the loan was made or the benefit was conferred. Loans made before 6 April 2026 may remain subject to the earlier 33.75% rate, while later loans can fall within the 35.75% rate.

Why documentation matters

A director loan account should be reconciled regularly, not just at the year end. Records should show:

  • Each payment made to or on behalf of the director.
  • Amounts repaid by the director.
  • Dividends or salary credited against the balance.
  • Any interest charged.
  • The date and nature of each transaction.
  • Board approval where appropriate.
  • Bank evidence for repayments.

Professional office desk with a closed ledger, calculator and keys for director loan planning

HMRC’s new online loans-to-participators tool allows a company, participator or agent to confirm that a loan reported on the Corporation Tax return has been fully repaid. The tool requires the company UTR, details from the CT600A and the name and role of the person using it.

It should not be used if the tax return needs to be amended. It is a repayment confirmation tool, not a replacement for correcting inaccurate figures.

Ross Martin explains the tool and the rate change in its SME tax update on loans to participators.

4. Late Corporation Tax interest is 7.75%

HMRC late payment interest on Corporation Tax is currently 7.75%, based on the Bank of England base rate plus four percentage points.

The interest is calculated daily. A delay of a few days may not seem significant, but the cost can become material where the Corporation Tax liability is large or payment is postponed repeatedly.

For a company with a £20,000 Corporation Tax liability, a 30-day delay at 7.75% would cost approximately £127 in interest, before taking account of any rate changes.

The best protection is simple:

  • Confirm the Corporation Tax liability before the filing deadline.
  • Set aside funds throughout the year.
  • Do not assume that filing the return gives extra time to pay.
  • Contact your accountant promptly if cash flow is tight.
  • Consider whether instalment payment rules apply as the company grows.

Use this Corporation Tax deadline reference when checking the payment date for your accounting period.

5. Deep dive: choosing accountants for small business as you grow

A growing company may outgrow a basic bookkeeping service before it realises it. The right accountant should do more than prepare year-end accounts. They should help the directors understand what the figures mean and what needs attention next.

When comparing accountants for small business, look beyond the monthly price.

Market pricing can vary widely. Some limited company services are advertised from around £85 per month, while more involved support may be quoted annually or on a project basis. At Accountant Search, pricing starts at £300 inc VAT for the relevant service scope. The important point is to compare what is included rather than choosing the lowest headline figure.

Ask each accountant:

  • Is the quote for accounts, Corporation Tax and confirmation statement support?
  • Are bookkeeping and payroll included?
  • Will they review the director’s loan account?
  • Do they provide tax planning before the year end?
  • How quickly will they respond to questions?
  • Will the same person handle the business each month?
  • Are software licences, VAT returns and personal tax returns extra?
  • Can they support funding applications or growth planning?
  • What happens if HMRC opens an enquiry?

A specialist limited company accountant should understand the relationship between company profits, Corporation Tax, dividends, salary and director loans.

That matters more as the compliance landscape becomes stricter. An accountant who only produces historic figures may not spot a growing overdrawn loan account, an approaching marginal relief band or a cash-flow problem before it becomes urgent.

Technology is useful, but it is not a substitute for judgement. Cloud accounting, bank feeds and automated bookkeeping can improve accuracy, while regular adviser reviews help directors make better decisions.

Accountant and business owner reviewing financial documents together

Action list for the week

  • Review any proposed HMRC or tax disclosures with your accountant.
  • Check whether Corporation Tax profits are approaching £50,000 or £250,000.
  • Forecast the company’s tax liability and reserve cash for payment.
  • Reconcile every director’s loan account.
  • Confirm the dates and evidence for any loan repayments.
  • Check whether the 35.75% Section 455 rate applies to new loans.
  • Compare your current adviser’s services with what your growing company now needs.
  • Save a copy of the latest accounts, tax return and supporting calculations.

Self-Assessment tick-box: [ ] If you or another director has personal income outside the company, check whether a Self Assessment return or payment is required. If you need help, visit our Self-Assessment accountant page and complete the SA registration form so we can match you with a suitable adviser.

This article is for general information only and is not a substitute for advice on your company’s circumstances. Tax rates and HMRC practice can change, so obtain current professional advice before acting.

Further reading