Since September 2022, the Economic Crime and Corporate Transparency Bill has been making its way through parliament. The Bill, among other things, sets out key changes to small company filing options.
The intention is to make more financial information available to the public, and improve transparency of the company register.
Companies House estimates that organised fraud costs businesses and the public sector approximately £5.9 billion each year. By requiring more detail, this type of activity should become easier to spot.
It also argues that, by improving transparency, lenders can offer financial backing to businesses with greater confidence and so businesses will be better supported as they grow.
Fewer filing options for small companies and micro-entities
As it stands, a small or micro company preparing abridged or full accounts for its members is not required to file a copy of its profit and loss (P&L) account. This also applies to the director’s report.
A profit and loss account shows how much money your business has made – i.e., a ‘profit’ or a ‘loss’. It captures both revenue and expenses in a trading period.
Plans to reform the reporting and filing requirements at Companies House include limiting the filing options to micro-entities and small companies and removing the option to file abridged or filleted accounts.
This means that rather than filleting out information prior to submission, removing the P&L and some notes, small and micro companies will need to file what they prepare in terms of their profit and loss account.
Companies will not be required to show the detailed profit and loss, but a summary. This will, however, mean that the business’s turnover and profit will be on public record.
We anticipate that further detail, as well as associated timescales for implementation, will be set out in secondary legislation.
Other changes impacting company accounts
Beyond those outlined above, there are a few other changes on the horizon as follows:
- Companies relying on an audit exemption (i.e., dormant companies) must submit an eligibility statement to confirm that they meet the criteria for said exemption.
- Digital filing and full iXBRL tagging of financial information will be mandated. In the event of non-compliance with this, accounts are likely to be rejected.
- The number of times a company can shorten its Accounting Reference Period will be limited.
What does this mean for small and micro companies?
This change in law, together with others introduced to identify beneficial owners of property in the UK, is meant to help stop Money Laundering through UK companies. It does mean, however, that small companies will be compelled to show their turnover and profit. In our opinion, this may lead to businesses dis-incorporating in the short to medium term.
Accounts preparation and compliance support
Our experts in Hertfordshire, Bedfordshire and Cambridgeshire, can assist you with the preparation of your annual accounts, can ensure you comply with the relevant accounting regulations and can give you accurate financial information to use in your business.
We support you year-round, with a partner-led service, not just when your accounts are produced. We will be keeping abreast of all further developments in respect of these plans.
To discuss your requirements with us, contact us on 01462 708810 or fill in our online enquiry form.
