Small and Micro Companies are going to have to file their accounts at Companies House in the near future.
Are you a Limited company small business owner? Do you currently file your accounts at Companies House or are you glad that this is one requirement that doesn’t apply to you? Well, whether you want to or not, it may soon no longer be up to you. If you are a limited company or a limited liability partnership (the following does not apply to sole traders) and you don’t currently file your P&L with Companies House, this is going to impact on your business. There is a lot of information here, much of which may seem technical, but please bear with me as it’s all important stuff and if you’re unsure of anything please feel free to get in touch.
In order to try to tackle business fraud, and following the usual consultation, the government is going to publish an Economic Crime Bill. One of the key purposes of this (presumably now made more urgent by the invasion of Ukraine and the need to apply sanctions to more Russian businessmen) is to prevent the use of anonymous or fraudulent shell companies and partnerships.
Once the legislation is passed, Companies House will “change its statutory role from being a largely passive recipient of information to a much more active gatekeeper over company creation and custodian of more reliable data,”according to Lord Callanan, the Minister for Business. Part of this change will also require small and micro companies to change their filing practices.
The intention is to simplify the current system. At present, there are a number of ways in which you can file your accounts, including the option to file abridged and filleted accounts, but this will be reduced to just two: ‘micro-entities’ and ‘small companies.’
What this means is that all small companies (Limited companies that is – sole traders are excluded) will have to file a P&L account and a balance statement. The government says this will ensure that key information such as turnover and profit or loss is publicly available and this will consequently help creditors and consumers make better informed decisions. In addition, small companies will also have to file a directors’ report. Moreover, they will have to use to use full iXRBL tagging of accounts information on the register. Companies House will reject accounts that do not meet the required tagging standard. Again, if this is all Double Dutch to you, please get in touch.
To make it harder for anyone to file anonymously, everyone setting up, managing, and controlling companies and other registrable entities will have a verified identity with Companies House - or have registered and verified their identity via an anti-money laundering, supervised third-party agent. If you fail to verify your identity or comply with these new requirements you will be subject to new criminal and civil sanctions. These are yet to be decided, but it’s expected they could well involve director bans for breaking rules on company registration and misuse of registered addresses.
The government also wants corporate directorships to be restricted to entities registered in the UK. This is because there is evidence that illegal activity is facilitated by multi-layered company control across different countries and there is a concern that the use of registered UK companies gives organised crime a respectable front behind which to conceal their activities.
To be fair, this is all underpinned by a serious attempt to make things easier for small businesses. The government has made it clear that companies will only have to prepare and deliver one set of accounts (thus closing the loophole where a company can file multiple accounts with different government departments).
One option being considered by government is a ‘File Once with Government’ approach. As its name suggests, this would mean your accounts only need to be filed once with government in a central (digital) repository to which government bodies could then go to get any information they might need.
In addition, Companies House is going to be given more powers, enabling it to question suspicious director appointments or filings and, in some cases, ask for further evidence or even reject the filing. It is also going to be made easier for Companies’ House to share data with the police, other government bodies and the private sector.
Now for the bad news…
The government’s own impact assessment suggests that the annual cost to business will be £27.3m. At a time when everyone’s costs are rising rapidly and there is no immediate end in sight to burgeoning inflation, this will be a concern to many small businesses, many of which are having to pay their suppliers more and also trying to cope with the requirements of MTD. The government’s argument is that if these measures increase the quality of Companies House information by 5%, then the benefit will offset the estimated cost to business for the entire policy package (and, the government says, this excludes any wider benefits from helping to tackle economic crime).
There are currently 4.4 million active companies registered with Companies House (with the vast majority small or micro) and 650,000 incorporations each year. If yours is one of them and you don’t currently file accounts with Companies House, please, as I said at the outset, don’t hesitate to speak to us. Remember, your initial chat is free and it could save you a lot of heartache (not to mention money) in the future.
Paul Mollison, M&S Accountancy and Taxation