The way we operate at Companies House is changing. Since 22 September 2022, the Economic Crime and Corporate Transparency Bill has been making its way through Parliament. The changes set out in the Bill will improve transparency by making more financial information available to the public. This will help tackle economic crime and provide more information for enforcement agencies. As part of this package of reform, we are streamlining the accounts filing options available to small and micro companies.
Why profit and loss requirements are changing
Public disclosure of information is a requirement for all companies. In return, companies have the protection of limited liability. During our consultation phase, the accountancy profession, credit sector law enforcement bodies, and some individuals suggested that the minimal disclosures that small companies are allowed to make does not give a level of transparency that is sufficient to get limited liability protection.
A small or micro company that prepares abridged or full accounts for its members does not have to file a copy of its profit and loss account and/or the director's report with Companies House. This minimal level of disclosure has the potential to appeal to fraudsters wishing to present a false image of the company.
Research published by the Home Office has calculated that the cost of organised fraud to businesses and the public sector in the UK is £5.9 billion a year. Small and micro companies make up most of the register, so any meaningful changes to the quality of the information on the register will impact them. Improving transparency and having better quality information will make it easier to spot fraud when it happens, and will also help to support business growth.
What the changes mean for small and micro companies
Fewer options
To simplify our framework, we’ll be reducing our account filing options to just two: micro-entities and small companies. Under the new measures, the option for abridged accounts will be removed. Having fewer filing options will help to avoid confusion and reduce costly mistakes.
More information
Under this new framework, all small companies, including micro-entities, will be required to file their profit and loss accounts. Having key information such as turnover and profit or loss available on the public register will help creditors and consumers make better-informed decisions. It will also improve the value of the information on the register for users.
The lack of detail in small and micro-accounts has made it impossible to confirm eligibility to file under a specific regime and claim audit exemptions. It has also made it difficult for lenders and creditors to determine the creditworthiness of small businesses. This can deter them from offering finance which hinders small business growth.
The detail and format of the profit and loss account filings will be set out in secondary legislation. This is being developed in consultation with business and accountancy groups. We’ll keep you updated on its development and on timescales.
As small and micro-entity companies are already required to file a copy of their annual accounts to HMRC, we do not anticipate this change to be overly burdensome.
Other accounts-related changes
Other changes to filing accounts will include:
- a requirement for accounts to be filed digitally and fully tagged using iXBRL
- the removal of a paper filing option for most companies
- the requirement for a company relying on an audit exemption to provide an additional statement by the directors on the balance sheet, confirming the exemption being relied upon, and that the company meets the qualifying criteria
- giving the Registrar power to require all component parts of a filing to be delivered together to facilitate the digital filing of more complex accounts
- limiting the number of times a company can shorten its Annual Reporting Period
The White Paper on Corporate Transparency and Register Reform provides a deeper policy overview of the reforms. (PDF, 1,920KB)
Read more about these measures in the Economic Crime and Corporate Transparency Bill factsheet.
Keep a look out on our blog for more details about the upcoming changes and what you can do to prepare, and sign up to our newsletter if you’d like to receive regular updates.
For more information about upcoming changes to accounts, read our blog post on moving to software-only filing.
Find out more about the changes to UK company law and how they might affect you.
19 comments
Comment by JNP posted on
We are a not-for-profit company and have been given exemption from filing accounts with HMRC.
We only exist to look after our village green and recreation area.
The company owns the village green - the company directors do not.
The village green is covered by a number of legal agreements which mean it cannot sold or changed - it must remain a village green existing for the benefit of the residents of our village.
Our turnover each year varies and is often zero.
A couple of times in the last 16 years we have been able to get a government or council grant or donations from local villagers to improve some aspect of our village green.
We do not make a profit and we don't sell anything.
Our accountant is a volunteer who provides her services for free as we try to keep our costs down.
We normally file our accounts usinging the web filing system. This new requirement sounds like a lot of additional work and expence...
Comment by Amy Soullier - Digital Content Manager posted on
We understand that changing any process can be daunting, but we will do all we can support filers as they move to software filing.
We are collating the information on free software options and the qualifying criteria. This information will be shared on help pages once we have timelines for each stage of the incremental roll-out of the move to software-only filing.
Comment by Mr Aftab Pirbhai posted on
I am glad you are collating information on free software options and qualifying criteria. There are many small companies which would find it too onerous and expensive to use IXBRL. Please bear in mind everyone filing their accounts is not computer literate.
Comment by Jon Mills posted on
Many micro entities file their own accounts and cannot cope/ do not have access to ixbrl
Comment by Amy Soullier - Digital Content Manager posted on
These changes are in line with other changes set out in the Economic Crime and Corporate Transparency Bill to improve the quality and value of information on the register and help fight economic crime.
Additionally, as accounts evolve it becomes less and less practical to maintain different systems for different accounts types.
Using software improves transparency, traceability, and validation of accounts filings. This will help tackle economic crime and provide more information for enforcement agencies and the public.
We are collating the information on free software options and the qualifying criteria. This information will be shared on help pages once we have timelines for each stage of the incremental roll-out of the move to software-only filing.
Comment by Aftab Pirbhai posted on
Why are small companies being forced to software-only filing? Companies with a turnover below a certain threshold should be allowed to file paper accounts including their Profit and Loss Account.
Comment by Amy Soullier - Digital Content Manager posted on
These changes are in line with other changes set out in the Economic Crime and Corporate Transparency Bill to improve the quality and value of information on the register and help fight economic crime.
Additionally, as accounts evolve it becomes less and less practical to maintain different systems for different accounts types.
Using software improves transparency, traceability, and validation of accounts filings. This will help tackle economic crime and provide more information for enforcement agencies and the public.
Comment by Richard Williams posted on
I am a director of a company which is non trading as it exists solely as a vehicle for the three leaseholders of a house to collectively hold the freehold and manage the property. As such the standard headings for the online filing of the Profit and Loss Account are not relevant, so we have had to prepare and file accounts in what we consider the most appropriate format, with an Income and Expenditure Account.
It does not appears that the unique position of such companies, or indeed other non-trading companies has been recognised in the one size fits all approach. This is surprising as Companies House has now recognised their existence in special advice on company formation. HMRC on the other hand has accepted for many years their special character, and for this reason exempts them from the normal requirement to file Corporation Tax returns.
Comment by Amy Soullier - Digital Content Manager posted on
These changes are in line with other changes set out in the Economic Crime and Corporate Transparency Bill to improve the quality and value of information on the register and help fight economic crime.
Additionally, as accounts evolve it becomes less and less practical to maintain different systems for different accounts types.
Using software improves transparency, traceability, and validation of accounts filings. This will help tackle economic crime and provide more information for enforcement agencies and the public.
We are collating the information on free software options and the qualifying criteria. This information will be shared on help pages once we have timelines for each stage of the incremental roll-out of the move to software-only filing.
Comment by Alan Golding posted on
I have a very small, non-trading company. Please do not make it more difficult for me to make a return. What on earth is iXBRL?
Comment by Amy Soullier - Digital Content Manager posted on
These changes are in line with other changes set out in the Economic Crime and Corporate Transparency Bill to improve the quality and value of information on the register and help fight economic crime.
Additionally, as accounts evolve it becomes less and less practical to maintain different systems for different accounts types.
Using software improves transparency, traceability, and validation of accounts filings. This will help tackle economic crime and provide more information for enforcement agencies and the public.
iXBRL is the digital language of accounts. It involves the application of computer-readable tags to business data. This enables the data to be processed automatically by software. You can read more about XBRL/iXBRL on GOV.UK
Comment by alain williams posted on
Sigh, so you are going down the MTD (Making Tax Difficult) route that came in with VAT last year.
I have a small business and do not need accounts software - I tried many years ago and it was more effort than it was worth. The on-line filing is not hard to do - especially for VAT. I gave up VAT registration to escape this.
Getting hold of an accounts package is costly, seem to start at £600/year, a noticeable fraction of profits. They all seem to expect that I have a computer that runs on Microsoft - I do not, I exclusively use Linux.
I looked at GNUcash - an open source accounts program - but HMRC act against open source software making it hard to use.
So: please keep your on-line filing -- if only for very small businesses.
Comment by Bethan Clark - Communications Officer posted on
To maintain Companies House’s position as a world leading registry, we must keep up with international best practice and adapt to the digital economy.
Using software improves transparency, traceability, and validation of accounts filings. This will help tackle economic crime and provide more information for enforcement agencies and the public.
We recognise the filing habits of some companies will need to change and acknowledge the specific challenges that this may present for those micro entities and small companies who don’t already file digitally. A large portion of our filers (64%) already file using third-party software and only a quarter (25%) use our web filing service. Companies House will work with software partners to open up digital filing options for all account types and signpost filers to low-cost options.
This information will be shared through appropriate channels as we take forward our incremental roll-out of software-only filing.
We believe the move to mandated digital filing is essential. It will help businesses to modernise practices and be more resilient; which in turn will support economic growth. As accounts evolve it becomes less practical and more confusing to maintain different systems for different account types.
Comment by LESLIE SEAL posted on
HMRC already have the information you claim is required to comply with other legislation. Why do Companies House wish to make private details of trading a public document for all to see.
Comment by Bethan Clark - Communications Officer posted on
HMRC is a separate organisation from Companies House. Information is filed with each organisation for different purposes and only the information filed with Companies House is placed on the public register.
The public disclosure of information is a fundamental requirement for all companies, given in return for the protection of limited liability. During our consultation, we received extensive feedback on the benefits of public information to creditors and customers in helping them to make better informed business decisions when transacting with a small company. The additional information will also help efforts to combat economic crime.
However, we do appreciate concerns surrounding the obligation to file a public profit and loss account. We are keen to strike the right balance between sufficient useful information to creditors and users of the register information, and the potential impacts on privacy for small business owners.
We will invite further input from our stakeholders about what information we collect, and what information we publish as we develop the policy detail further.
Comment by Fran Whittle posted on
Another year of spending hours trying to send our annual accounts only to find it impossible. The fee has increased enormously = for what? -all this soft ware which , from other comments , people who do hours of voluntary work for free cannot use.
Is it too much for your staff to receive these accounts by post which would anyway take me a couple of hours to get to a working post office......?
Please let me know what will happen if I never get them to you - we get struck off? What does that mean for our charity and volunteers?
I notice from other comments you are sending our standard replies. This is not helpful. We are not all robots - yet. Please can a human being tell me what to do. Thank you
Comment by Luke C posted on
Hi Fran, thank you for your comment.
We're sorry to hear you've experienced issues filing your charity accounts. Please contact us directly at enquiries@companieshouse.gov.uk or by phone: 03031234500 where we'll be able to provide you with additional support.
Comment by Dr Christopher A Smith posted on
I am honorary treasurer of a small charitable company limited by guarantee. We are an endowed charity and do not engage in trade or fundraising. We have no employees and work through grants, mainly to other charities. Our income is from investments and is exempt from tax because it is expended on our charitable objectives.
So far I have had to file by post, because there is no other means for a company limited by guarantee apart from filing jointly with a tax return.
Do you plan to provide a suitable method of filing online for our situation?
Comment by Luke C posted on
Hi Christopher, thank you for your comment.
Yes. We are working closely with the software industry to ensure availability of products for all accounts types. We will communicate when these options become available and provide an extensive notice period before you’ll need to transition to filing accounts in a digital format.