Companies House Reforms – significant change for small companies
- 10th August 2023
Navigating the ever-changing landscape of business regulations can be challenging, especially when it comes to understanding how new reforms will impact your business.
The UK Companies House reforms are a set of changes to the way that Companies House operates. The reforms are designed to improve transparency and make it easier to track and investigate financial crime including the proposed requirement for all companies. These reforms will affect all limited companies, particularly small businesses, making it crucial for you to understand the implications and adapt accordingly.
The reforms were announced in the Queen's Speech in 2022 and are expected to be implemented in stages. Once the legislation receives approval, Companies House has confirmed it will increase its charges to cope with the additional cost of dealing with the reforms.
All companies, including small companies, will have to file a profit and loss and have this on public record, as the option to file abridged or filleted accounts will be removed.
There are also increased identity verification requirements. All directors and people with significant control (PSCs) will need to prove their identity to Companies House when forming new companies.
Companies House will also have increased powers to investigate and take action against non-compliance. This could include fines, prosecutions, and deregistration.
The changes will impact all companies but particularly small companies. Small companies are those that meet at least 2 of the following criteria:
- Not exceeding turnover of £10.2m
- Not exceeding 50 employees; and/or
- Not exceeding gross assets of £5.1m
Given these criteria, it appears that the vast majority of companies will be registered as small.
The impact of the reforms will vary depending on the size and structure of the business. However, some of the potential impacts include increased compliance costs, reduced flexibility in how accounts are filed, greater transparency but reduced privacy and an increased risk of investigation.
For any small companies potentially impacted by these changes, there are measures that can help to mitigate the impact of the reforms such as considering whether an alternative structure that doesn’t have to file accounts with Companies House (such as a sole trader or partnership) would be more appropriate. Clearly, this needs careful consideration, including taking into account all factors such as limited liability and tax.
The UK Companies House reforms are a significant change for businesses of all sizes. By taking the necessary steps, businesses can mitigate the impact of the reforms and continue to operate successfully.
We have created a short guide to the Companies House Reforms, which you can download here.
Do talk to your accountant in relation to these changes and how they will impact you, or contact us for a no-obligation discussion about your accountancy needs.
All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.