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Does a micro-entity have to disclose related party transactions?

No, except director loans and guarantees.

Micro-entity accounts need no general note about dealings with people linked to the company. But money your company lends to a director, and any guarantee it gives for one, must go in a note, even if the loan was repaid before the year end.

Published

At a glance

Applies to
Companies using the , FRS 105
Related party note
Not required. You may add one, but then you must take account of the rules for it
Loans to directors
Show every loan or credit to a director, and any for one, that existed during the year
Tax on a loan to you
Your company may owe a separate tax on it. It can claim relief if the loan is repaid

Sources

This entry is general information for directors of UK private limited companies, not advice about a particular company.

What to do

  1. Give the four notes the rules ask for. No other notes are required. They go at the foot of your . See "The four notes at the foot of your balance sheet" below.

  2. List every loan to a director. Include any your company gave a director, and any it gave for one, that existed at any time in the year. Include loans repaid before the year end.

  3. Show the details and the totals in the note. The list is under "Loans to directors go in a note".

  4. Check whether your company owes tax on the loan. This applies if your company is a and the loan went to a , such as a shareholder.

Sources

How it works

The four notes at the foot of your balance sheet

need only four notes. They sit at the foot of the . They cover:

  • arrangements that are not shown on the balance sheet, where their risks or matter

  • the average number of people your company employed in the year

  • loans, your company gave its directors

  • money your company has committed to pay, and and possible debts, that are not on the balance sheet

None of these is a general "" note. The standard's list of defined terms does not even include a related party. A also does not have to prepare a directors' report.

Why so few? The law presumes that micro-entity accounts with only the required items give a "". Directors must then ignore any rule in an that asks for more.

You may add more information if you want. But once you add an item, you must take account of the accounting standard's rules for it. For micro-entities, that means the rules in , and those include related party notes.

For example

Say Bramley Studio Ltd pays Priya's brother £1,200 in 2026 to build its website.

None of the four notes covers this, so the accounts need no note about it.

If instead

Priya chooses to add a note about it anyway. She must then take account of the small company rules for that note.

Sources

The detail The exact rules

paragraph 6.1: Section 6 sets out the information that shall be disclosed in , and where. A micro-entity is permitted, but not required, to disclose more, and paragraph 1.3 applies to anything extra. Paragraph 6.2: the notes of a UK micro-entity are presented at the foot of the statement of financial position and include information about (a) off-balance sheet arrangements (Companies Act 2006, section 410A); (b) employee numbers (section 411); (c) advances, credit and guarantees granted to directors (section 413); and (d) financial commitments, guarantees and contingencies (regulation 5A of, and paragraph 57 of Part 3 of Schedule 1 to, the Small Companies Regulations).

Section 410A: if the company is or has been party to arrangements not reflected in its balance sheet, and at the balance sheet date their risks or benefits are , the notes give their nature and purpose, to the extent necessary for assessing the company's financial position. A company in the small companies regime need not give their financial impact. Section 411(1): the notes disclose the average number of persons employed by the company in the financial year. SI 2008/409, regulation 5A: nothing in Schedules 1, 2 or 3 requires a micro-entity's accounts to contain notes, except the paragraph 57 note. FRS 105 paragraph 6A.4 also requires commitments undertaken on behalf of, or for the benefit of, a parent, fellow subsidiary or subsidiary, or an undertaking in which the micro-entity has a participating interest, to be stated separately.

The FRS 105 glossary has no entry for "related party": it is alphabetical, and "" is followed directly by "reporting date". Companies Act 2006, section 415(1A): the duty to prepare a does not apply if the company qualifies as a micro-entity.

Section 396(2A): the are presumed to give the true and fair view required by section 396(2). Section 396(6) disapplies, for those items, the duty to add information (section 396(4)) and the true and fair override (section 396(5)). FRS 105 Appendix III paragraph A3.10 repeats the presumption. Section 393(1A): where the accounts comprise only micro-entity minimum accounting items, the directors must disregard any provision of an accounting standard that would require additional information. Where the accounts contain an item additional to those items, the directors must have regard to any provision of an accounting standard that relates to it.

FRS 105 paragraph 1.3: a micro-entity that includes additional information "shall have regard to" any requirement of that relates to it. FRS 102 Appendix C to Section 1A has a "Related party disclosures" heading. Paragraph 1AC.35 requires small entities to give the disclosures in FRS 102 paragraphs 33.9 and 33.14, subject to paragraphs 33.1A and 33.11. Materiality: FRS 105 paragraph 3.8 says a micro-entity need not give a specific disclosure if the information is not material, except when the Act requires it regardless of materiality.

Sources

Loans to directors go in a note

If your company lends money to a director, the accounts must show it in a note. This covers advances and credit. It also covers any guarantee your company gives on a director's behalf. The standard includes this note because company law requires it.

For each loan, the note gives:

  • the amount

  • an indication of the interest rate

  • the main conditions

  • any amounts repaid, written off or

The note also gives the totals of the amounts lent, repaid, written off and waived.

For a guarantee, it gives the main terms and the most your company could have to pay. It also gives anything your company has paid or become liable for in meeting the guarantee, including any loss when it is enforced. The note gives totals of both.

The note covers every loan that existed at any time in the year, whenever it was made. That is why a loan repaid before the still appears. It covers anyone who was a director at any point in the year.

For example

Say Priya borrows £3,000 from Bramley Studio Ltd in June 2026 and repays it all in November 2026.

Lent
£3,000
Repaid
−£3,000
Owed at 31 December 2026
£0

Nothing is owed at the year end, but the loan existed during the year, so it still goes in the note.

The rule covers loans from your company to a director. It says nothing about money a director lends to the company. Likewise, it covers guarantees your company gives for a director. It says nothing about guarantees a director gives for the company's debts.

Sources

The detail The exact rules

Companies Act 2006, section 413(1): a company that does not prepare must show in the notes to its individual accounts details of advances and credits granted by the company to its directors, and guarantees of any kind entered into by the company on behalf of its directors. FRS 105 paragraph 6A.3 repeats this. The details of an advance or credit are (a) its amount; (b) an indication of the interest rate; (c) its main conditions; (d) any amounts repaid; (e) any amounts written off; and (f) any amounts waived. The totals of (a), (d), (e) and (f) must also be stated. The details of a guarantee are (a) its main terms; (b) the amount of the maximum that may be incurred; and (c) any amount paid and any liability incurred for the purpose of fulfilling it, including any loss on enforcement. The totals of (b) and (c) must also be stated.

Section 413(6): "directors" means the persons who were directors at any time in the . Section 413(7): the requirements apply to every advance, credit or guarantee subsisting at any time in the financial year, whenever it was entered into, and whether or not the person was a director when it was entered into.

Sources

Your company may owe tax on a loan to you

If your company is a and lends money to a , such as a shareholder, it owes a separate tax on the loan. It is charged as if it were Corporation Tax for the accounting period in which the loan is made.

There are exceptions. For example, HMRC says the charge does not apply to a loan made in the normal course of a business that includes lending money.

The rate follows the of income tax, for the tax year in which the loan is made. That is why it changes with the date of the loan. HMRC gives it as 33.75% for loans made from 6 April 2022, and 35.75% for loans made on or after 6 April 2026.

The tax is due on the day after the end of 9 months from the end of that . If the loan is repaid, or written off, your company can claim relief from the tax, in full or in part.

For example

Say Bramley is a close company and Priya a participator. She borrows £3,000 in June 2026.

Tax on the loan
£3,000.00 × 35.75%
£1,072.50

She repays it all in November 2026, before the tax falls due. So Bramley can claim relief from all £1,072.50.

Sources

The detail The exact rules

Corporation Tax Act 2010, section 455(1) and (2): if a close company makes a loan or advances money to an individual who is a participator in the company or an of such a participator (or to certain or partnerships linked to a participator), there is due from the company, as if it were Corporation Tax for the accounting period in which the loan or advance is made, the percentage of the loan that corresponds to the dividend upper rate (Income Tax Act 2007, section 8(2)) for the tax year in which the loan is made. Section 455(7) points to the exceptions in section 456. Section 455(3): the tax is due on the day following the end of the period of 9 months from the end of the accounting period in which the loan or advance was made.

HMRC's manual (CTM61505): the rate was 33.75% for loans made on or after 6 April 2022, and 35.75% from 6 April 2026. The charge applies only if the company is a close company when the loan is made. The exception for a loan or advance is where it was made in the ordinary course of the company's business and that business includes lending money. Corporation Tax Act 2010, section 454: a participator is a person having a share or interest in the capital or income of the company, including a person who has or is entitled to acquire or voting rights, and a .

Section 458(2): relief is given from the tax, or a proportionate part, if the loan is repaid, or the debt is released or written off. Section 458(3): relief is given on a claim, made within 4 years from the end of the financial year in which the repayment, release or write-off happens. Section 458(4) and (5): if the repayment, release or write-off happens on or after the day the tax is due, relief cannot be given before the end of 9 months from the end of the accounting period in which it happened.

Sources

Consequences

If you get it wrong

If you leave a loan to a director out of , your accounts miss a note the law requires. Directors must not approve accounts unless they are satisfied the accounts give a .

Approving accounts that break the law can be an offence. It applies to a director who knew, or was reckless about it, and did not take reasonable steps to prevent it. The penalty is a fine.

Sources

Less common situations

Your company is part of a group. A company whose accounts are included in cannot use the at all.

Your company owns shares in other companies. The law lets the government make rules requiring notes about "". The rules that did this for companies not preparing group accounts have been removed. If your company holds shares in another company, get advice on what to disclose.

Sources

The detail The exact rules

Companies Act 2006, section 384B(2)(b): the micro-entity provisions do not apply to a company's accounts for a year if it is not a but its accounts are included in consolidated group accounts for that year. Appendix III paragraph A3.5 lists "those included in group accounts" among the excluded companies. Section 409 lets the Secretary of State make regulations requiring information about related undertakings in the notes. Apart from a statement where an exemption under those regulations is used (section 409(5)), the section sets no disclosure itself. Section 410 has been omitted. In SI 2008/409, Schedule 2 ("Information about related undertakings where company not preparing group accounts") and regulation 4, which applied it, were both omitted by SI 2015/980.

The Periodic Review 2024 amendments to FRS 105 contain no instruction amending Section 6 or its appendices. The February 2026 and March 2025 amendments change other paragraphs of FRS 105, not Section 6.

Sources

Worked example: Bramley Studio Ltd

Priya Bramley is the director of Bramley Studio Ltd and its only , under a service contract. Its on 31 December 2026. Say she borrows £3,000 from the company in June 2026, interest-free and repayable on demand, and repays it all in November 2026. Say Bramley is a close company and Priya is a participator.

The employee note shows an average of 1 person. Priya's salary as director needs no note, because none of the four notes asks for it.

Note: advances to directors, year to 31 December 2026

  • Amount advanced

    Amount
    £3,000

    Lent to Priya in June 2026

  • Interest rate

    Amount
    None

    Interest-free

  • Main conditions

    Amount
    On demand

    Repayable whenever the company asks

  • Repaid

    Amount
    £3,000

    Repaid in November 2026

  • Written off

    Amount
    £0

    Nothing written off

  • Waived

    Amount
    £0

    Nothing waived

  • Owed at 31 December 2026

    Amount
    £0

    Nothing owed, but the note is needed because the loan existed during the year

Sources

With one loan, the totals the note must give are the same figures: £3,000 lent, £3,000 repaid, and nothing written off or .

Tax on the loan

  • Loan made in June 2026

    £3,000.00

    Made on or after 6 April 2026, so the 35.75% rate applies

  • Tax on the loan

    £1,072.50

    £3,000 × 35.75%, as if Corporation Tax for the year to 31 December 2026

  • Relief claimed

    −£1,072.50

    The whole loan was repaid in November 2026, before the tax fell due

  • Tax to pay after the claim

    £0.00

    Our working: £1,072.50 − £1,072.50

Sources

Our working on the date: the tax would fall due on 1 October 2027. That is the day after the end of 9 months from 31 December 2026.

Sources

Not covered here

Income tax for you personally on an interest-free loan from your company, and the full rules on loans to and from directors. a gives under FRS 102 are covered in micro-entity or small company accounts.

Where this comes from

80 official sources. Open a group to see them.

The law 37 sources
HMRC 12 sources
GOV.UK 10 sources
Companies House 2 sources
FRC 19 sources

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