The recent approval of the Economic Crime and Corporate Transparency Act has paved the way for tighter regulations concerning how companies report information to Companies House in the UK.
Small companies, including micro-entities, are now mandated to submit a profit and loss account. These companies must also provide a director’s report, making their turnover publicly available.
Additionally, the Act eliminates the option for companies to prepare abridged accounts.
Who will be impacted?
The impact of these rules depends on a company’s size classification.
A small company is defined as meeting two of the following criteria: a turnover of over £10.2 million, £5.1 million, or less on its balance sheet, or having 50 or fewer employees.
Micro-entities, on the other hand, are characterised by two of the following criteria: a turnover of £632,000 or less, £316,000, or less on their balance sheet, or 10 employees or fewer.
While the Act has been awaiting approval for some time, there is currently no established timeline for the implementation of these new regulations.
Companies House have advised that the specific requirements for the profit and loss account will be detailed in forthcoming regulations, and companies will be given ample notice of the changes.
In addition to the profit and loss filing requirements, directors of companies using audit exemption rules, like dormant companies, will need to provide additional information, including a statement confirming the company’s eligibility for the exemption.
This is the first step in a broader plan, as the government intends to mandate digital filing and full tagging of financial information in iXBRL format and reduce the frequency with which companies can shorten their accounting reference period.
Reactions to the requirements
Opinions on these requirements have been mixed.
While some argue that the profit and loss disclosure is long overdue and necessary for transparency, others express concerns about commercially sensitive information being publicly accessible.
Some have even suggested reverting to a subscription-based Companies House service. Clients will need advance notice of these legal requirements to ensure compliance.
Public opinion varies as well, with a significant portion opposing the reforms due to concerns about privacy and competitive disadvantages.
Critics argue that exposing small businesses’ financial information could lead to unfair scrutiny and disadvantages when dealing with larger customers.
Whether profit and loss accounts will be publicly accessible remains to be decided by the secretary of state.
These measures are part of a broader effort to combat fraud, enhance transparency, and ensure the accuracy of information in the Companies House register. The government aims to strike a balance between transparency and minimising burdens on businesses while addressing issues related to fraudulent activities and incomplete information.
By requiring more comprehensive reporting, the government hopes to reduce the risk of misuse and money laundering, improving the overall quality and reliability of information on registered companies.
How we can help
Navigating the recent regulatory changes in UK company reporting can be a complex task.
Williamson & Croft is here to assist your company in smoothly adapting to these new requirements.
We specialise in helping businesses of all sizes comply with the relevant regulations, ensuring your reporting is accurate, timely, and meets the necessary standards.
From preparing profit and loss accounts to addressing director’s reports and more, we’ve got you covered.