Following on from the introduction of the Economic Crime Transparency and Enforcement Act, the next major development in corporate transparency will be Companies House reform.
With Companies House in need of modernisation, the government has been consulting with various bodies, including ICAEW, on the extent of these reforms. It issued its final White Paper on Corporate Transparency and Register Reform at the end of February.
This will involve some significant changes to filing requirements, including profit and loss accounts for small and micro entities.
ICAEW welcomes many of the measures set out in the government’s White Paper, says Sally Baker, Head of Corporate Reporting Policy for ICAEW. “They will benefit trade and the UK economy and will also help to combat economic crime. We particularly welcome reforms that improve the quality and value of financial information held on the register, including the introduction of mandatory digital filing and greater checks of the information being filed.”
Key changes include:
- Filing deadlines will not be shortened at the moment, but legislation will be introduced to facilitate future changes.
- Small companies will no longer have the option to prepare and file abridged accounts and will be required to file both their profit and loss account and directors’ report, ie, the option to file ‘filleted’ accounts will be removed.
- Micro-entities will also be required to file their profit and loss account but will continue to have the option to not prepare or file a directors’ report.
- Dormant companies will be required to file an eligibility statement
- All companies will be required to file accounts digitally, with full tagging.
“Having expressed concerns that shortening filing deadlines will have a detrimental effect on the quality of reporting, we are pleased to see that time periods to file accounts will not be reduced at this time,” says Baker. “We recognise the merits of financial information being as current as possible but this must be balanced with ensuring information is of high quality.”
Although ICAEW supported a review of the filing regimes for smaller companies, in particular the removal of the option to prepare abridged accounts, it did not support small and micro companies being required to file a profit and loss account on the public register.
“While it’s a fundamental principle that companies afforded limited liability protection should be required to make certain information publicly available, the ability of a company to carry on its trade without serious prejudice must also be protected,” says Baker. “The publication of a company’s profit and loss account allows sensitive commercial information to be readily available to a company’s competitors.”
Although it will be some time before these measures come into effect, members should keep up to date with the changes on the horizon and discuss the implications with their clients. The Financial Reporting Faculty will continue to monitor developments and represent members’ views. Stay up to date with all the latest news and developments by visiting the Financial reporting news and insights page on a regular basis.