Companies House & Accounts Reform: Key Changes Ahead

HMRC has provided clarity this month on when its services to register as an Authorised Corporate Service Provider (ACSP) and carry out the required identity verification will be available. With the implementation of some of these core changes fast approaching, we recap the story so far and look ahead to the future for UK companies, agents and service providers.

Background

In 2023, against a backdrop of public outcry around perceived high levels of organized fraud, in particular in relation to pandemic era personal protective equipment (PPE) procurement, the UK passed the Economic Crime and Corporate Transparency Act (ECCTA). This legislation aims to enhance the corporate information available to stakeholders and the wider public and empower the UK’s registrars, Companies House, to play a more active role in detecting and preventing fraudulent activity carried out by companies and their agents.

There are two main strands to this legislation, both of which will have a significant impact on professionals across the accounting, audit and tax sectors:

• Companies House reform; changes to the role of the registrar in monitoring and making public information provided by UK companies and their agents
• Accounts reform; changes to the form and content of the financial information entities are required to publicly file.

The reforms, considered to be the strongest put in place in over a century, are wide ranging and will take a number of years to fully come into effect. We summarise the main points below.

Companies House reform

Companies House reform aims to give the registrar greater powers to challenge and interrogate information that it has been provided with a view to enhancing the quality and reliability of information available to the public. Beginning in March 2024, the registrar now has greater powers to ‘clean’ the available data on its platform, removing or amending inaccurate information (such as an individual’s residential address erroneously or fraudulently provided as a company address and company names designed to mislead or otherwise facilitate fraud) and querying and rejecting new information received via customer filings on an ongoing basis. Controls around company postal addresses have also been tightened: with organisations no longer able to use PO boxes or other similar mail forwarding services, the registrar provided the option to strike off entities which fail to provide an appropriate address, and companies are now required to provide a valid email address when filing.

Going forward, as of 18 March 2025, ACSPs will be able to register as a Companies House authorised agent and, from 1 April 2025, voluntarily verify their identity, both of which will be required to act and file for a company with the registrar from that point onwards. From summer 2025 onwards, the registrar aims to be able to increase access to information on the Register of Overseas Entities and expand the identity verification requirement to company directors and make it a compulsory element of filing of any document with Companies House. Companies House will also aim to facilitate a higher level of cross checking and data sharing with other bodies, including law enforcement.

Accounts reform

Currently, entities qualifying for the small companies regime or microentities have the option to file abridged or ‘filleted’ accounts with the registrar. Both of these give the option of making reduced disclosures in public filings with the registrar, for example, the ability to omit directors’ and auditors’ reports in certain circumstances, and provide reduced information on accounting policies and other information. The key issue, common to both abridged and filleted accounts, is that both formats permit the omission of a profit and loss account in the public filing.

Whilst there are clear benefits to businesses in terms of reduced administration costs, complexity and increased discretion here, this has also opened up the small and micro company rules to abuse by individuals looking to obfuscate the company’s activities for fraudulent purposes, and has made it difficult for authorities to identify when errors or instances of noncompliance (such as with requirements to undergo external audit, for example, have occurred.

As such, subject to the passing of secondary legislation (which is currently being drafted within input from sector experts), in future all companies will be required to include a profit and loss account in their public filings. Furthermore, accounts will be required to be filed digitally, with iXBRL tagging in place. Company directors claiming an audit exemption will be required to state on the balance sheet the basis for this election.

Anyone involved in the running of a company, but particularly those who prepare accounts for small and micro companies, will need to be aware of and make preparations for the changes ahead. Practitioners should make plans to ensure they can meet enhanced disclosure requirements within the required time frame.