With the UK companies register being accessed 9.4 billion times a year, and the value of Companies House data to users estimated to be £1-£3bn a year, trust in the information is of great importance to underpin the strength of the UK’s business environment.
Following its 2019 consultation on Corporate Transparency and Register Reform, the Department for Business, Energy and Industrial Strategy recently issued three further consultations to take forward its plans to reform the role of Companies House and increase the transparency of UK companies. This article highlights the proposals contained in the consultation Improving the Quality and Value of Financial Information on the UK Companies Register, and summarises ICAEW’s response.>
The proposals
A key proposal to help fulfil the overarching ambition of moving towards a ‘file once with government’ approach is mandatory digital filing of accounts, with full tagging.
A further proposal, aimed at improving the usefulness of information by ensuring it is as current as possible, is to shorten filing deadlines to three months for public companies and to six months for private companies. Recognising the additional burdens this may place on companies, respondents were also asked how the transition to shorter filing deadlines might be eased.
Proposals include a requirement for company directors to declare the company’s eligibility to file accounts under the regime being used, eg, the micro-entities regime. Disclosure of the threshold conditions set out in the Companies Act (turnover, balance sheet and number of employees) would be required. The measures are in response to concerns that the financial reporting regime in the UK is being abused, particularly to facilitate money laundering.
A number of filing options are currently available to small companies. However, the value of certain options to users has been questioned. A review is proposed, with a view to reducing the number available. Views were also sought on the benefits and disadvantages of requiring all companies to file the most detailed set of accounts prepared.
To improve the reliability of information, increasing checks when accounts are filed was suggested. These proposals, and their scope, were covered in more detail in another of the consultations. Finally, suggestions as to how financial information could be better displayed on the register were requested.
ICAEW's response
ICAEW welcomes steps to improve the integrity and quality of information on the register and believes reform is required as a priority.
We support the ambition for companies to be able to file once with government and the goal of introducing mandatory digital filing, with tagging. We believe these to be positive steps that will increase the value of data on the register and assist in preventing economic crime. However, there are important challenges that will need to be overcome. For example, how data submitted under a file once approach might be appropriately safeguarded, and how suitable filing software can be made available for all sizes of company.
We have concerns that some of the proposals do not align with the goal of ensuring requirements are proportionate. Shortening filing deadlines and requiring companies to file the most detailed set of accounts they produce are likely to increase burdens placed on companies significantly. A proportionate approach that strikes the right balance between timeliness of information and quality and costs is required.
While we welcome a review of the filing requirements for smaller companies, in our view a more fundamental review of the reporting regimes in UK company law, and the associated reporting requirements, is needed.
What happens now?
Primary legislation will be required to implement measures arising from the suite of consultations. The government is aware of the need for a period of transition, so it is likely to be some time before these proposals come to fruition. Nevertheless, these are potentially the most significant reforms to the UK companies register in its 177-year history and it is advisable to be prepared. The Financial Reporting Faculty will keep members up to date with developments at icaew.com/ukregulation.
About the author
Sally Baker, Technical Manager, Financial Reporting Faculty, ICAEW