There are very significant changes on the horizon for the majority of limited companies, vastly increasing the amount of sensitive information available to the public at Companies House.
Currently small companies (companies meeting two of: less than £10.2m annual turnover, £5.1m balance sheet value, and less than 51 employees) can take advantage of the ability to file filleted or abridged accounts – which reduces the detail in the accounts filed at Companies House by removing certain elements.
One of the main elements being the profit and loss account and related notes (detailing a company’s profit or loss in the period). Many would think of a company’s profit and loss information as being sensitive information that they would not like in the public domain, however, under these changes this information will now be publicly available.
A planned overhaul of filing requirements at Companies House, with a view to increasing transparency in annual filings means that this these options to file shortened forms of accounts at Companies House will no longer available and all companies will have to file a profit and loss account as well as a balance sheet.
Micro-entities (meeting two of: less than £632,000 annual turnover, £316,000 balance sheet value, and less than 11 employees) will retain the exemption from filing a directors’ report (broadly a report by the directors outlining the financial state of the company), but small companies now have to file one (not currently required).
Many shareholders in limited companies have historically relied on the ability to file reduced information at Companies House (using abridged or filleted accounts), reducing the amount of information available to the public.
These changes have largely gone unnoticed, however, they are sizeable changes and will impact a huge number of businesses structured as limited companies.
For some, these changes will impact whether shareholders want to continue trading as a limited company and be a further consideration for those that are considering trading as a limited company.
Why the changes?
These changes have been announced as part of the Economic Crime Bill, with the government looking to tackle global economic crime, improve corporate transparency and drive confidence in the UK economy.
Evidence has suggested that filleted and micro-entity filing is of little value as it does not contain sufficient information to give a true and fair view of the financial position of a company. It is also very simple to file micro-entity accounts at Companies House, regardless of whether the company is eligible to do so. This has also meant that historically micro-entity companies have been attractive to fraudsters.
The increase in information available at Companies House will also make it easier for creditors and stakeholders to make informed decisions when reviewing company information.
Other changes
- Anyone setting up, running, owning or controlling a company in the UK will need to verify their identity with Companies House or have registered their identity with an anti-money laundering supervised third party agent.
- Companies House will have increased authority to investigate and challenge suspicious information and inform security agencies of potential wrongdoing.
- Only entities registered in the UK will be eligible for corporate directorships, meaning that Company agents from overseas will no longer be able to create companies in the UK.
- As Companies House aims to become fully digital, companies will have to file digitally tagged accounts, using the Inline eXtensible Business Reporting Language (iXBRL) format, a type of computer language. Companies House will reject accounts that are not in this format. Currently accounts have to be filed in this way at HM Revenue & Customs , and therefore for most companies this will not be a significant issue.
- Filing deadlines (currently 9 months after the year end for private limited companies) will not be shortened at the moment, however, legislation will be introduced to facilitate future changes.
- Dormant companies will be required to file an eligibility statement.
Whilst there is no confirmed date for the introduction of these changes and it could be some time until these measures are introduced, we would encourage company directors and shareholders to discuss any potential implications with their accountant.
This article was published in Cornwall Living Magazine, edition 123, on 13th June 2022: https://issuu.com/engine-house-media/docs/cl_123