⚠️Small companies will soon need to file statutory accounts that include a profit & loss report⚠️
A draft bill has now been published accompanied by a white paper listing proposals to reform Companies House due to an increased number of sanctions being imposed on Russia. To identify any suspicious activity, they would need to know what assets are held in which companies and who owns those companies.
To implement these changes Companies House is aiming to become fully digitalised. Therefore, directors or their agents will be asked to file digitally using IXBRL, where the information will need to be fully tagged. This will enable HMRC to cross-reference the information with the data held.
Over the recent years, evidence has shown that micro-entities accounts do not give sufficient information to portray a true and fair view of the financial position of the company. The flexibility given to businesses to reduce burdens on business and supporting growth has made these filing options more attractive to fraudsters who wish to represent a false picture and are often used by companies that can’t meet the eligibility criteria. Therefore, taking advantage of the ability to file abridged accounts, they can reduce the amount of information that could be made available to both the shareholders and Companies House.
The proposed changes
The new proposed changes to increase transparency in annual filings will require businesses to include profit and loss when filing. This will ensure that key information such as turnover is made available to the public to help creditors and consumers make informed decisions. Therefore, there will no longer be options for abridged or filleted accounts for micro and small companies.
Under the current requirements the profit and loss, related notes, and the director’s report could have been omitted when filing at Companies House. However, eliminating these filleting options with the new proposed changes means that all companies will have to file accounts including profit and loss, balance sheets, and accompanying notes. Small companies will need to file a director’s report; however, micro-entities will remain exempt from this requirement.
New requirements have also been introduced for dormant companies where they will be required to file an eligibility statement which will provide the Registrar with additional information to take tougher actions against false filings in the future.
With the new powers being attributed to the Registrar, there will be restrictions on the use of corporate directors and officers. Directors’ identities will have to be verified, which will help to increase the accuracy of the financial data on the register. They will be able to apply fines when company directors or secretaries fail to meet their responsibilities and to remove any incorrect information from the register.
They are also looking at introducing a “file once” approach to prevent fraudulent activity to reduce filed information from being obscured.
Overall, introducing the requirement to file the profit and loss could benefit companies who are seeking loans. Credit rating agencies will be able to collect enough information from Companies House to form an opinion on a small or micro-entity’s creditworthiness.
