Anticipated since the spring, the UK government published its Economic Crime and Corporate Transparency Bill (the Bill) in September 2022. The Bill is the second part of a legislative package designed not only to bring in stronger powers to tackle money laundering and other illicit activity, but also to boost enterprise and deliver benefits to the UK economy.

The first piece of legislation, the Economic Crime (Transparency and Enforcement) Act 2022, was fast-tracked through Parliament in March 2022 in response to Russia’s invasion of Ukraine. This was too soon to incorporate measures set out in the government’s Corporate Transparency and Register Reform White Paper of February 2022 (see Transforming the company register, By All Accounts, July 2022) and hence the need for a second Economic Crime Bill. This article provides an update on aspects of the Bill relating to improving financial information on the register.

The filing obligations for small companies and micro-entities are currently 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. The removal of abridged accounts ensures that, in accordance with the Companies Act, companies only prepare and deliver one set of 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.

While included in the White Paper, mandatory digital filing (with full tagging) is not explicitly mentioned in the Bill. However, the Bill transfers the power to mandate ‘the method by which documents are delivered’ from the Secretary of State to the Registrar, paving the way for digital filing to be introduced more readily in the future.

Becoming a digital organisation is fundamental to Companies House achieving its 2020-25 strategic goals. With this in mind, businesses can expect digital filing to simply be a matter of when, not if.

The White Paper’s proposal for directors of dormant companies to complete an eligibility statement confirming the company meets the criteria for filing dormant accounts has not been included in the Bill. Instead, a broader requirement for directors to identify when the exemption from audit is being taken and to confirm the company’s eligibility to take the exemption is included. Details of how this addresses the underlying issue of companies avoiding late filing penalties by misfiling dormant accounts have yet to become clear.

Section 468 of the Companies Act gives the government a general power to make further provisions about accounts through secondary legislation (such as Statutory Instruments) once the Bill is enacted.

Measures not contained within the Bill that are likely to be introduced via secondary legislation include:

• format details of the profit and loss account required of small and micro-entities; and
• changes to limit the number of times a company can shorten its accounting reference period.

The Bill contains many more proposals besides those outlined above, broadening the Registrar’s powers and providing Companies House with more effective investigation and enforcement powers.

The Bill is currently passing through Parliament. It is expected to obtain Royal Assent by the spring of 2023, although some elements of the Bill may not come into force immediately.

The Financial Reporting Faculty will continue to monitor developments closely and keep members informed.