Unpacking the Latest Regulatory Changes for Small Businesses
The passing of the Economic Crime and Corporate Transparency Act has paved the way for a shake-up in the filing procedures for small companies. Here’s a breakdown of the key changes and how they might impact your business.
The Act introduces requirements for both small companies and micro-entities to file a profit and loss account with Companies House. Small companies are also tasked with submitting a director’s report and the Act eliminates the option for companies to prepare abridged accounts.
In addition to the revamped profit and loss filing obligations, directors of companies falling under audit exemption rules, such as dormant companies, will now need to provide extra information. This includes a statement confirming the company’s qualification for the exemption.
These changes mark the first step in a broader government plan, including the enforcement of digital filing, full tagging of financial information in iXBLR format, and a reduction in the frequency of shortening accounting reference periods.
To fall under these new rules, a small company must meet two of the following criteria:
- Annual turnover of £10.2 million or below.
- £5.1 million or less on its balance sheet.
- 1-50 employees.
Micro-entities, which the government defines as meeting two of the following criteria:
- Turnover of £632,000 or less.
- £316,000 or less on its balance sheet.
- 1-10 employees.
What’s the Timeline?
While the Bill has been in the works for several months, a concrete timeline for the implementation of these new rules is yet to be established. Clarity on the requirements will be provided with the issuance of secondary legislation, outlining the format and content of the profit and loss account to be submitted to Companies House.
Whilst the government is tightening the reins on reporting, the decision on whether profit and loss accounts will be accessible to the public lies with the secretary of state.
A Tool Against Fraud
These changes are part of a broader initiative to empower Companies House in combating fraud. The government envisions these reforms creating a more reliable and accurate companies register. By requiring additional information to be filed, the risk of misuse of disclosure options to hide fraudulent activities is expected to reduce.
Look out for further developments as these regulatory changes unfold. If you have any queries on how this may affect your business, please do not hesitate to contact your local Perry’s office.