The government is going ahead with plans to tighten up the accounts filing framework for small companies with mandatory profit and loss figures but has not set out implementation timetable
Under the new rules in the Economic Crime and Corporate Transparency Act 2023, small companies will be required to file a profit and loss account and directors’ report. This will ensure that key information such as turnover is available on the public register. Companies will no longer be able to file abridged accounts.
A spokesperson at the Department for Business & Trade told Accountancy Daily: ‘We have not set out a timetable for implementation of the new rules but any changes will not affect accounts due from 1 January 2024. We need to allow time for Companies House to update their systems. We will be confirming more details about the filing changes in due course.’
‘Requiring more information to be filed will reduce the risk of deliberate misuse of minimal disclosure options to hide money laundering and other fraudulent activity. 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 government said.
Rather than detailing the filing obligations for small companies andicro-entities in the same section of Companies Act 2006, the Economic Crime and Corporate Transparency Act 2023 splits the requirements into two sections, which aims to make the filing requirements clearer for companies to understand. The new legilsation covers sections 53 to 58 [from page 47 onwards].
Under the new rules, amendments to the small companies filing requirements require the preparation of annual accounts in accordance with section 396 CA 2006.
In future, small companies will be required to file a profit and loss account, and directors’ report. This will ensure that key information such as turnover is available on the public register at Companies House. A company is defined as small if it meets two of the following criteria: turnover of less than £10.2m, £5.1m or less on balance sheet and 50 employees or fewer.
Micro-entities with turnover of less than £632,000, balance sheet of £316,000 and 10 employees or under, will be required to prepare annual accounts in accordance with the requirements of section 396 CA 2006, which requires the preparation of a profit and loss account. They will not have to produce a directors’ report.
There will no longer be an option for micro companies to prepare abridged accounts.
The government said ‘the amendments will make the filing requirements easier to understand, reduce fraud and error, and improve transparency’.
Directors who use the audit exemption rules, including dormant companies, will have to file an exemption statement, identifying the exemption being relied on and to confirm that the company qualifies for the exemption.
This additional statement is intended to act as a deterrent to criminal activity and to provide additional enforcement evidence.
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.
The government plans to make further changes to reporting rules in a future amendment to the Act, including mandating digital filing, full tagging of financial information in iXBRL format, and a reduction of the number of times a company can shorten its Accounting Reference Period.