The Economic Crime and Corporate Transparency Bill has completed its initial journey through the House of Commons and the House of Lords and is now at the stage known as, consideration of amendments. This is where the second House’s amendments are considered, and the Bill may go back and forth until both Houses agree on the Bill. The Bill is expected to receive full Royal Assent over the coming months. The new Act will be aimed at reducing the abuse of corporate structures and at the same time tackling economic crime.
As part of the measures that will be introduced, Companies House will be streamlining the accounts filing options available to small and micro companies. At present, small businesses are able to file what are known as filleted accounts with Companies House. This means that these small or micro companies can choose not to submit a profit & loss account and/or director’s report to Companies House. In this way, this information will not be made public. Filleted accounts can be submitted whether or not a company has prepared full or abridged accounts.
Companies House has now acted on various concerns that this minimal level of disclosure has the potential to appeal to fraudsters wishing to present a false image of the company.
Companies House will therefore introduce a new framework under which all small companies, including micro-entities, will be required to file their profit and loss accounts. The option for abridged accounts will also be removed.
A small company is defined as a business with two of the following:
- a turnover of £10.2 million or less
- £5.1 million or less on its balance sheet
- 50 employees or less
A micro-entity is defined as a business with two of the following:
- a turnover under £632,000
- £316,000 or less on its balance sheet
- 10 employees or fewer.
No date has yet been announced for the implementation of these changes. However, it is important that those who currently submit filleted or abridged accounts familiarise themselves with the upcoming changes and how best to prepare for them. This represents a significant change for these businesses.