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Improving the quality and value of financial information on the UK companies register

Following their 2019 consultation on Corporate Transparency and Register Reform, the Department for Business, Energy and Industrial Strategy (BEIS) recently issued three further consultations to take forward its plans to reform the powers and role of Companies House. ICAEW has submitted its responses to the consultations, which cover the powers of the registrar, implementing the ban on corporate directors and how to improve the quality and value of financial information on the UK companies register. This page outlines the outlines the key points proposed in the latter of these consultations and provides a summary of ICAEW's response.

Overview

The consultation 'Improving the quality and value of financial information on the UK companies register' invited views on:

  • How companies might in future be able to file accounts once only with government, instead of separately to Companies House, HMRC and other agencies.
  • The proposal that all companies should file accounts digitally with Companies House.
  • Reducing timescales for accounts to be filed. 
  • The filing options available to small companies with the aim of achieving a better balance between minimising burdens and ensuring the information is valuable.
  • Additional checks Companies House could carry out on accounts filings.

The consultation’s proposals are set out under three themes:

The sections below provide a summary of the proposals in each area and also detail the specific questions asked in the consultation under each theme.

How information is submitted to Companies House

The consultation explores the potential to move further towards a ‘file once with government’ approach, indicating that a number of proposals in the consultation will place the Government in a better position for this to be achieved. Proposals to require accounts to be delivered digitally and to introduce full tagging of accounts are outlined.

The consultation also seeks views on reducing timescales for accounts to be filed. It asks for views on the impact of shortening filing deadlines to three months for public companies and to six months for private companies from the end of the reporting year, and seeks to understand any additional burdens this may cause.

What information should be filed at Companies House

The consultation outlines the information currently required by Companies House and asks whether further information might improve the value of the register. It is proposed that company directors should confirm the company’s eligibility to file certain type of accounts and that companies should disclose the three threshold conditions set out in the Companies Act (turnover, balance sheet and number of employees) for the filing regime being used.

The consultation also seeks views on revising the small company accounts filing options. It proposes to review the filing options available for small companies with the aim of reducing the number of options available.

What Companies House does with this information

The consultation sets out proposals to increase the checking of accounts and asks for views on how financial information could be better displayed on the register.

ICAEW response

We strongly support efforts to improve the quality of financial information on the UK companies register. We believe improving the value of the information on the register will benefit trade and the economy, and also help combat economic crime.

We support the ambition of allowing companies to file once with government, believing this will reduce burdens for companies and improve efficiency for both companies and government. We also support the goal of introducing mandatory digital filing, with tagging, and greater checks of information filed. We believe that these are positive steps that will increase the value of the data held on the register and assist in preventing economic crime.

We are concerned however, that some of the proposals and suggestions within the consultation paper do not align with the goal of ensuring that requirements for companies 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, particularly smaller companies.

While we recognise the merits of ensuring financial information is as current as possible, we believe this must be balanced with ensuring the information is of high quality. A proportionate approach that strikes the right balance between improved timeliness of information with quality and increased costs to companies is required. We therefore believe further consideration must be given to the practical impacts of shortening filing deadlines.

While we note that there have been improvements in the filing regime for smaller companies in recent years, we welcome a review of the filing requirements for such companies. However, in our view, a more fundamental review of the reporting regimes in UK company law, and the associated reporting requirements, is needed. For example, by reviewing the company size limit thresholds and related eligibility criteria held within legislation. As part of this review, we would also welcome a review of the micro-entities regime.

Next steps

The Government will consider responses to this consultation alongside the other aspects of register reform and intends to confirm its plans in 2021. ICAEW will continue to engage with BEIS as proposals develop further. Primary legislation will be required to implement these measures.

Related resources

Consultation questions

Part A: How information is submitted to Companies House

1. What features of the Companies House and HMRC filing regimes should be kept under a harmonised filing process?

2. What information (if any) in annual accounts should not be made public?

3. What benefits do you envisage for filing once across government?

4. What challenges do you envisage for filing once across government?

5. In your view, why do some companies continue to file on paper?

6. What challenges will mandatory digital filing present?

7. What can government do to assist these companies to transition to digital filing?

8. What challenges do you foresee with filing fully tagged accounts with Companies House?

9. As a user of financial information on the register, what information in a company’s accounts is critical for you and should be checked (validated) to ensure it is tagged correctly?

10. With continual advancements in digital technology, what are your views on shortening the time allowed to submit accounts to Companies House?

11. What would be the impact if filing deadlines were shortened to three months for public and six months for private companies from the end of the reporting year?

12. What measures could the government implement to ease the transition to shorter filing deadlines?

Part B: What information should be filed at Companies House

13. What will be the challenges for companies submitting a declaration of filing eligibility with accounts?

14. Under what circumstances, if any, should the eligibility information collected with the declaration not be published on the public register?

15. What other information should Companies House collect that would be useful for:

Combating economic crime;

Increasing the value of the information available on the register?

16. As the directors’ declaration will need to include information in respect of turnover, balance sheet total and number of employees, what changes, if any, would you make to these definitions in Part 15 of the Companies Act to make the definitions clearer?

17. What would be an appropriate sanction for making a false declaration of eligibility?

18. What is the minimum level of financial information that a micro-company should disclose on the public register?

19. Are there are existing filing requirements under the small or micro-entity regimes that could be discarded?

20. What would be the impact on small companies if the Companies House filing requirement was aligned with HMRC’s to require a profit and loss account?

21. How do you think the current small company filing options could be amended to help combat economic crime whilst maintaining a simple filing system for small entities?

Part C: What Companies House does with this information

22. What would be the benefits of requiring companies to file the most detailed set of accounts that have been prepared?

23. What would be the disadvantages of requiring companies to file the most detailed set of accounts that have been prepared?

24. What are your views about the general premise that checks should be conducted on all accounts prior to them being accepted as fit for filing on the public register?

25. Additional checks will be limited. Bearing in mind resource and expertise constraints, can you provide examples of what information Companies House should check as a priority and how it can be checked?

26. Examples of suspicious activity in a company’s accounts may be incomplete, inconsistent or apparently misleading information. Can you provide examples of information in a company’s accounts that may be an indicator of suspicious activity?

27. Which elements of financial information would be most useful to see on the company overview page?

28. What non-financial information would you like to see on the company overview page?

29. Do you have any additional comments about this proposal?