However, the move from abridged and filleted accounts has raised concerns over the disclosure of data, which would see companies having to disclose their profits, turnover and other financial information to the public. Previously, only large companies had to disclose such information with small and micro companies protected by the reporting standards.
Micro companies and companies with one director are subject to the changes, while shareholder directors will have to disclose previously confidential information, such as salaries and dividends, to their stakeholders.
There’s no timetable for the changes, but companies are expected to receive adequate notice for accounts preparation.
Why the changes?
The changes, in the Economic Crime and Corporate Transparency Act 2023, focus on transparency of information and reducing fraud and error. The changes will ensure Companies House’s register is more reliable and accurate with greater ability to tackle economic crime. The modernisation of Companies House’s business practices address concerns about the impact of inaccurate or insufficient financial information on its public register being used to inform important business decisions. It will mean that key information such as turnover is available to the public.
Requiring more information to be filed will reduce the risk of deliberate misuse of minimal disclosure options. Simplifying the filing framework will prevent confusion and mistakes and improve the accuracy of the information. Ensuring all companies report sufficient information to determine a company’s size and eligibility to file under size specific regimes will improve the value and reliability of the information.
The new rules are also meant to crack down on abuse of dormant company rules. Evidence from law enforcement agencies shows that some companies file dormant company accounts and claim the dormant audit exemption, despite their bank accounts clearly showing that the company does not meet the definition of a dormant company. The additional statement is intended to act as a deterrent and help Companies House address such offences in the future.
What are small and micro companies?
A company is classified as “Small” when it satisfies two of the following:
- a turnover of £10.2 million or less
- £5.1 million or less on its balance sheet
- 50 employees or fewer
A company is classified as “Micro” when it satisfies two of the following:
- a turnover of £632,000 or less
- £316,000 or less on its balance sheet
- 10 employees or fewer
What will small and micro companies report to Companies House?
Currently, small and micro and dormant company reporting requirements are:
- Dormant – qualify as “small” and do not require an audit.
- Small – can use an audit exemption and choose whether to send a copy of the directors’ report and profit and loss account to Companies House, accounts can be abridged (simpler balance sheet and notes, no profit and loss account or directors’ report).
- Micro entity – prepare simpler accounts with statutory minimum requirements, send only a simple balance sheet to Companies House and can use audit exemption.
The changes mean that:
- Small companies file profit and loss account and directors’ report
- Micro-entities file profit and loss account
- No option to file abridged accounts
What else is changing?
Further changes are intended to be made at a later date including:
- mandating digital filing and full tagging of financial information in iXBRL format
- reducing the number of times a company can shorten its Accounting Reference Period
The changes may affect business owners’ decisions in the business, in particular around profit extractions and it’s important to seek advice from an accountant in this area.
What should you do?
It’s important to keep up to date with changing accounting requirements. The relationship with your accountant is important, in particular if you have concerns over how these changes will affect you. Our accountants are friendly and helpful, so please contact TaxAssist Accountants today on 0800 0523 555 or use our online contact form.
Date published 10 Nov 2023
Catherine Heinen, FCCA
Catherine is a Technical Content Writer at TaxAssist Accountants, and a qualified accountant. With experience working at two accountancy practices in the UK top 50 accountancy firms according to Accountancy Age, Catherine has significant experience in accounts, tax returns and advising clients. Catherine ensures businesses, business owners and individuals are kept up to date and informed by providing concise and informative technical material.
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