Small Companies will now be required to File Profit and Loss Figures under the newly passed Economic Crime and Corporate Transparency Act.
Small Companies will now be required to File Profit and Loss Figures to ensure that key information such as turnover is available on the public register. Companies will no longer be able to file abridged accounts.
Under the new rules whereby Small Companies will now be required to File Profit and Loss Figures, the preparation of annual accounts will be required in accordance with section 396 CA 2006.
Small Companies will now be required to File Profit and Loss Figures 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 the balance sheet and 50 employees or fewer.
Micro-entities with turnover of less than £632,000, a balance sheet of £316,000 and 10 employees or under, will also 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.
What are small companies and micro-entities?
A company is ‘small’ if, in a year, it satisfies any 2 of the following criteria:
- – a turnover of £10.2 million or less
- – £5.1 million or less on its balance sheet
- – 50 employees or fewer
A company is a ‘micro-entity’ if, in a year, it satisfies any 2 of the following criteria:
- – a turnover of £632,000 or less
- – £316,000 or less on its balance sheet
- – 10 employees or fewer
How will filing requirements for small companies and micro-entities change?
The government will streamline the existing filing framework for small and micro-entity companies.
Rather than having the filing obligations for small companies and micro-entities within the same section of the Companies Act 2006, the Bill splits the requirements into two sections, which aims to make the filing requirements clearer for companies to understand.
Under the new rules, micro-entities will be required to prepare annual accounts in accordance with the requirements of section 396 (which requires the preparation of a profit and loss account), but the amendments retain the option for micro-entities to not prepare a directors’ report.
Similarly, the amendments to the small companies filing requirements require the preparation of annual accounts in accordance with section 396. However, a small company will be required to file its profit and loss account and directors’ report. This will ensure that key information such as turnover is available on the public register. The changes will also remove the option for companies to prepare abridged accounts.
These amendments will make the filing requirements easier to understand, reduce fraud and error, and improve transparency.
What changes will be made to filing requirements for companies relying on audit exemptions (including dormant companies)?
An additional statement will be required by the directors when a company seeks to rely on an audit exemption (for example, dormant companies). The statement will require the directors to identify 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.
Directors who use the audit exemption rules, including dormant companies, will have to file an exemption statement, identifying the exemption being relied on and confirming that the company qualifies for the exemption.
What impact will these reforms have on the integrity of the register and the Registrar’s ability to tackle economic crime?
These reforms achieve a better balance between greater transparency and minimising burdens on business. They address concerns about the potential impact of inaccurate or insufficient financial information on the companies register being used to inform important business decisions.
Reforms to the filing options for small companies will help to tackle economic crime. There are concerns that, under the existing regime, companies use filing options that require minimal disclosure when they are not eligible to do so. Simplifying the filing framework will prevent confusion and mistakes and improve the accuracy of the information.
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 requirement for companies to file an eligibility statement will provide the Registrar with additional evidence to take stronger enforcement action for false audit exemption filings in the future. For example, evidence from law enforcement agents 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.
Will the government make any further changes using existing powers?
Further changes are intended to be made at a later date using existing legislative powers or powers being passed through this bill, 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
Small Companies will now be required to File Profit and Loss Figures – When does this change take effect?
As of now, there’s no fixed timetable for the rollout of these new regulations. However, companies have been assured that they will receive fair warning and adequate time for preparation.
How can MCL Accountants help with your queries on which Small Companies will now be required to File Profit and Loss Figures?
Contact MCL Accountants on 01702 593 029 if you have any queries on which Small Companies will now be required to File Profit and Loss Figures or if you need any assistance with the preparation and submission of your business accounts or self-assessment tax returns to HMRC.
- REQUEST A QUOTE
Ishan provides financial management, taxation and transactional advice to business entities of all sizes. His expert areas include statutory compliance, business taxation, personal tax & transactional processing and systems. Industry sectors include professional services, retail, hospitality and entertaining & media and advertising services.