The UK government is introducing the Economic Crime and Corporate Transparency Bill, which seeks to reform Companies House and its operations.
The proposed legislation aims to improve company information transparency and tackle economic crime.
In this article, we discuss the impact of these reforms on small businesses and provide a comprehensive overview of the changes.
Simplified Filing Choices for Small Companies
Companies House requires limited companies to file annual accounts to demonstrate their financial performance during each accounting period.
Typically, the accounting period coincides with the company’s financial year covered by the annual accounts, although exceptions may apply, such as during the first year of trading.
Under the proposed reforms, small businesses will be required to file accounts digitally using approved software.
The filing options will be streamlined, with only two categories for small businesses: micro-entities and small businesses.
Consequently, the option to file “abridged accounts” without a directors’ report and profit and loss statement will be eliminated.
This change aims to reduce confusion, minimise costly errors, and enhance the value of information on the register.
Mandatory Profit and Loss Account Filing
While limited companies are already familiar with filing profit and loss accounts for HMRC, they will soon be required to submit this information to Companies House as well.
The level of detail required for these accounts has not yet been specified, but the government hopes that this change will promote transparency regarding registered companies.
Key Aspects of Companies House Reforms
The primary measures introduced by the Companies House reforms include:
- Compulsory profit and loss account filing for all small companies
- Mandatory digital filing of accounts using approved software
- Identity verification for individuals involved in establishing, managing, or controlling a company
- Enhanced powers for Companies House to verify, remove, or reject submitted information
- Increased authority for Companies House to scrutinise suspicious information and cross-check it with other public and private sector bodies.
These measures aim to boost trust in the company register by ensuring the genuineness of submitted information and preventing fraudulent company registrations.
Note that companies with audit exemption must provide an additional directors’ statement on the balance sheet.
Timeline for Implementation
The precise timeline for implementing the Companies House reforms is not yet confirmed, but it is anticipated to occur within 2023.
Companies House Chief Executive Louise Smyth has expressed support for the reforms, stating that they represent “the most significant and far-reaching changes to the UK’s company register in over 170 years of history” and will enable Companies House to “play a much stronger role in making the UK a great place to do business.”
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