Is Companies House ID verification a benefit for tax purposes?

From 18th November 2025, company directors and People with Significant Control (PSCs) need to have their identities verified to comply with new Companies House rules.  

It may seem common sense that any costs incurred in verifying a director’s identity would be a cost of the company, as those costs are incurred due to being an office holder of the company. However, HMRC has not published any guidance on this matter and, as such, current advice is that if a company covers the costs, it is likely to be a benefit-in-kind (BIK) for tax purposes for the director.  

There is a slight difference in tax treatment depending on whether: 

• The company instructs an Authorised Corporate Service Provider (ACSP) to carry out the ID verification, or 
• The director pays for the ID verification, and the company reimburses the director.  

Company instructs the ACSP directly 

Where the company engages with an ACSP to manage the ID process for its directors, the amounts paid would be a BIK for the directors concerned. If the company paid a flat fee for a number of directors, the cost would be divided between the directors to give an individual value to the BIK. The next steps will depend on whether or not the company payrolls BIKs. The default position is that the company should report the benefit on the director’s P11D and pay Class 1A NICs. The director would pay income tax on the BIK through their self-assessment tax return. However if company policy is to include BIKs on the payroll (often referred to as 'payrolling benefits') then income tax and class 1 NICs would be deducted and paid via payroll and no P11D reporting or class 1A NIC would apply. See our article on payrolling benefits here

Director instructs the ACSP and claims the cost back from the company 

Where a director engages with an ACSP to verify their ID for Companies House purposes and the ACSP charges a fee to the director for doing so, then the company reimbursing that cost will constitute meeting the ‘pecuniary liability’ of the director i.e. an employer paying a debt of employee or director.  

The company payment to the director would be a BIK for the director. The company should deduct income tax and Class 1 national insurance contributions (NICs) through payroll. The taxable benefit should be reported on the P11D, but the company would not pay Class 1A NICs as Class 1 NICs (employees’ and employer’s) would already have been paid through payroll. 

Practically speaking, this means if the company wanted to ensure the director was not out of pocket, it would need to pay a ‘grossed up’ amount to make the net amount received by the director (once income tax and employees’ NICs were deducted) equal to the costs incurred. 

For example, assume the director has paid £100 for the ID verification and is a higher rate taxpayer, paying 40% income tax and 2% employees’ NICs. The company payment would be as follows: 

• Desired payment to director = £100.00 
• Grossed up payment x (100/ (100-40-2) = £172.41 
• Income tax @ 40% = (£68.96) 
• Employees’ NICs @ 2% = (£3.45) 
• Net payment = £100.00 

Are there any other options to avoid this situation? 

Yes, there are other options which may avoid this reporting and tax headache! 

Firstly, and most obviously, this cost only arises if the director’s ID verification is carried out by an ACSP. Companies House are providing three methods to verify ID at no cost – using the GOV.UK One Login app, the website and via a Post Office. See our article on how to verify your ID here. 

Secondly, the expense could instead be posted to the directors’ loan account instead of being reimbursed. This does mean that the director will have to pay the cost back but avoids the need to operate PAYE and incur the employer’s NICs cost and any cost of grossing up the payment for the company. 

Last updated 3 Oct 2025 | First published 3 Oct 2025

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This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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