By David Watkinson
AS you read this you may be wondering why we are not discussing the recent budget and the effect that it has on you and your living standards.
Well, unfortunately, whilst you are reading this post-budget the deadline for submitting this article is pre-budget, so has not occurred at the time of writing. We are already aware of some of the provisions, including the substantial increase in both employers and employees National Insurance contributions, to pay, initially, for additional services to cut the NHS waiting lists caused by Covid and then for improved Social Care for the elderly and disabled. However, everyone is hoping that there will be some new provisions to help mitigate the horrendous increases in the price of fuel and heating oil that have occurred during February and March.
Clearly, the war that is currently being inflicted on Ukraine by Russia is primarily a humanitarian disaster for the unfortunate people of Ukraine caught up in it. However, the imposition of sanctions as a result of the invasion emphasises the importance of the anti-money laundering regulations and, specifically for this article, the role of Companies House.
If the government is to successfully impose sanctions and identify suspicious activity that may be related to kleptocrats, organised crime gangs and other money launderers, they need to know, firstly, what assets are held in which companies and, secondly, who owns those companies. They are, therefore, accelerating the introduction of the already planned changes to Companies House procedures and filing requirements. To achieve this the government has now issued a whitepaper on corporate transparency and register reform together with detailed proposals, and they have accompanied this with a draft economic crime Bill.
Who will these proposals affect?
These proposals will affect everyone who operates a business through a Limited Company, as well as advisers appointed by those companies to prepare and submit financial accounts, etc.
The impact of these proposed changes on those who are not money launderers but are just law-abiding business people with registered companies is potentially significant. To implement these changes Companies House aims to become a fully digital organisation. Also, to increase transparency in annual filings there will no longer be options for abridged or filleted accounts for micro and small companies, removing some of the privacy (and cost savings) currently enjoyed by these entities.
What are the proposals?
Firstly, it is currently incredibly simple to set up a new company in the UK and there is no requirement to verify the directors’ identities. It is also incredibly simple to file almost anything, including micro-entity accounts, whether you are entitled to do so or not. It is now proposed that if you are setting up a company or making filings on behalf of a company, you will have to have a verified identity with Companies House. This affects not only the company and it’s directors but also any adviser used by them to prepare and submit documents on their behalf.
Secondly, there will also be restrictions on the use of corporate directors and officers. This is to maintain a direct link from the company to natural persons.
Thirdly, in order to identify suspicious activity people need to know more about these companies. Because Companies House aims to become fully digital, directors or their agents will have to file digitally tagged accounts, using iXBRL. Once information is tagged in this way it can be easily searched and cross-referencing with data held by HMRC.
Fourthly, the registrar will have greater powers that will help in the fight against economic crime. Their role will be to promote and maintain the integrity of the register and they will have new powers to query information and share data with other authorities. The registrar can also apply fines when company directors or secretaries fail to meet their responsibilities and to remove incorrect information from the register.
Abridged and ‘filleted’ accounts
Finally, the most noticeable changes proposed for small and micro-entities will be the increased transparency required in annual filings, meaning that the options for abridged or “filleted” accounts will be removed. Currently, where all the shareholders agree small companies can submit abridged accounts. This reduces the detail in the accounts that both shareholders and Companies House receive, compared to the basic small company provisions. The option for abridged accounts will now be scrapped meaning that all companies will have to file a profit and loss account as well as a balance sheet and small companies will have to file their directors’ report. Micro-entities will retain an exemption from the requirement to prepare or file a directors’ report.
WatkinsonBlack have considerable experience in all areas of taxation and business services, including providing a very cost-effective payroll bureau service. If you want to arrange a no-obligation initial meeting on any taxation or accounting matter then please contact us. Our office is now open during all normal office hours. Please note that these ideas are intended to inform rather than advise and you should always obtain professional advice before taking any action.
