Information for Business Owners following new legislation, 26 October 2023.
Executive summary
Following last year's new legislation, small and micro-sized companies will need to increase their financial information reporting to Companies House. This will likely mean more sensitive commercial information, such as revenue figures, will be publicly available.
Whilst the exact details, including the timing and format of the information to be disclosed, have yet to be finalised, the following Q&A provides business owners with an indication of what to look out for over the coming months.
Key Elements
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What do I need to know?
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The amount / type of information submitted each year to Companies House by small companies is changing.
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Why is this important to me?
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Information regarding a small company’s profit and loss account will now be required, which will be available for public viewing via Companies House.
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Why is this change being made?
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The Economic Crime and Corporate Transparency Act (‘the ACT’) aims to improve transparency and ensure that Companies House registers contain more accurate and trusted information.
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When will the Act be implemented?
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The details and format of the profit and loss account filings will be set out in secondary legislation. As such, the exact timings for when the changes come into force have yet to be determined.
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Changes to Profit and Loss requirements
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What is the current requirement?
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Currently, 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.
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What is wrong with current status?
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Research published by the Home Office has calculated that the cost of organised fraud to businesses and the public sector in the UK is £5.9bn. Improving transparency and having better quality information is expected to make it easier to detect fraud when it happens.
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What will be the future options?
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Under the Act, Small and Micro companies will no longer have the option to file abridged accounts. As such, all small companies, including micro companies, will be required to file their profit and loss accounts. However, only small companies will need to file a Director’s report.
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How might the changes impact my business?
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For Creditors and Consumers
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As more publicly available data about your business becomes available, your creditors and consumers will be able to make better-informed decisions. For example, a supplier may be willing to provide you with increased credit if they see your high revenue.
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For Competitors
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Competitors will have greater insight into your business's performance. However, you will also have better insight into theirs, improving your ability to benchmark yourself in the sector in which you are active.
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For Suppliers
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If your business relies on key suppliers, the increased level of publicly available information will enable you to consider their financial standing and ability to support your business.
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For those in B2B trade
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If your company trades with other businesses, the changes under the Act should make it easier for your sales teams to identify target customers that fit your identified market segment.
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Criteria
What do you mean by Small Companies?
A company is ‘small’ if, in a year, it satisfies any 2 of the following criteria:
- A turnover of £10.2M or less
- £5.1M or less on its balance sheet
- 50 employees or fewer
What will the Act Change?
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Changes to Accounts
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Transitioning towards filing accounts by software only and changes to small company accounts filing options as outlined above.
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Confirmation statement
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New requirements to provide a registered email address.
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Transparency of Ownership
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New requirements to provide additional shareholder information.
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What are the other Changes?
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The Act will lead to other changes, which include greater powers for Companies House to query information; Identity verification for anyone setting up, running, owning or controlling a UK company; changes to limited partnerships; and the ability for individuals to have personal information protected from public view.
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Important Notice
This file note is for guidance only. Specific advice should be sought from the Accountant engaged by your individual Company. To find out more information, go to Companies House.
