The Economic Crime and Corporate Transparency Bill is the second part of a legislative package designed to bring in stronger powers to tackle money laundering and other illicit activity. The first piece of legislation was fast-tracked in response to the Russian invasion of Ukraine and enacted on 15 March 2022. Further information on this can be found in ICAEW’s A guide to the Economic Crime Act 2022.
This latest Bill follows February’s publication of the Corporate Transparency and Register Reform White Paper which set out the government’s response to reforming Companies House, having previously carried out several public consultations. The legislation as drafted will bring in many, although not all, of the reforms in the White Paper and is designed to enhance the powers given to Companies House as well as improve the quality and value of financial information on the register.
Set out below are the key measures impacting the quality of financial information on the register.
Simplifying filing obligations
The current filing obligations for small companies and micro-entities are within the same section of the Companies Act 2006. To make the requirements easier to understand, the Bill splits these into two separate sections.
The Bill goes on to simplify and streamline the filing options for small companies, which will no longer have the option to prepare and file abridged accounts. Small companies will be required to file both their profit and loss account and directors’ report, thereby also removing the option of filing so-called ‘filleted’ accounts.
Micro-entities will similarly be required to file their profit and loss account but will continue to have the option not to prepare or file a directors’ report.
Sally Baker, Head of Corporate Reporting Policy in ICAEW’s Financial Reporting Faculty, says: “While we’re sympathetic to the commercial sensitivities of small and micro-entities being required to file a profit and loss account, ICAEW also recognises the widely held view that companies afforded limited liability protection should make financial information public. With the Bill set to be enacted by the spring, we encourage firms with clients filing under the small and micro-entities regimes to start conversations informing them of the changes sooner rather than later.”
Audit exemption statement
To reduce the risk that entities are falsely claiming exemption from audit, the Bill makes clear the requirement for directors to identify the exemption being taken and to confirm that the company qualifies to take it.
Integrity of information
The Bill will provide Companies House with more powers to verify the integrity of documents submitted. However, its existing limited powers to correct documents that contain inconsistencies or appear incomplete will be removed. Instead, documents that are not consistent with information held by or available to the Registrar will be rejected if they cause the Registrar to doubt whether all requirements relating to its contents have been complied with. Any document that is rejected would be treated as having not been delivered.
The Registrar will also have the power to require the company, within a 14-day period, to take all reasonable steps to resolve the inconsistency by delivering replacement or additional documents.
Facilitating electronic delivery
Several clauses in the legislation are designed to help facilitate the electronic delivery of documents to the Registrar. In line with this objective, Companies House will be given the authority to mandate the method by which documents are delivered. Although the Bill does not contain a requirement for companies to submit digitally tagged accounts in iXBRL format, these new powers pave the way for this to be introduced in the future.
The Bill also permits the Registrar to request filings consisting of more than one document to be filed together.
“While the introduction of digital filing as outlined in February’s White Paper is not explicitly present in the Bill, we’re pleased to see the groundwork being laid for this to happen in the future,” says Kate Beeston, Technical Manager in ICAEW’s Financial Reporting Faculty. “Digital filing will assist in the prevention of economic crime and enhance the value of information held on the register by aiding comparability.”
The Bill will be put to parliament for debate. It is expected to obtain Royal Assent by next spring, although some elements may not come into force immediately.
ICAEW will continue to monitor the situation closely and make members aware of further developments.
Discover more from ICAEW Insights
Insights showcases news, opinion, analysis, interviews and features on the profession with a focus on the key issues affecting accountancy and the world of business.
Hear a panel of guests dissect the latest headlines and provide expert analysis on the top stories from across the world of business, finance and accountancy.Find out more
News in brief
Read ICAEW's daily summary of accountancy news from across the mainstream media and broader financing sector.See more
Stay up to date
You can receive email update from ICAEW insights either daily, weekly or monthly, subscribe to whichever works for you.Sign up