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The way limited companies file their accounts is changing. Small businesses will now have to file profit and loss accounts to Companies House in a new bill passed by the government.
The Economic Crime and Corporate Transparency Act received Royal Assent on 26 October as part of new measures to improve transparency of company information and tackle economic crime.
But what will the new legislation mean for small businesses, and when will it become law? Read on for everything you need to know.
Limited companies must file accounts to Companies House every year to demonstrate performance during the accounting period.
Your accounting period is normally the same as the financial year covered by your company’s annual accounts – but it might be different in some circumstances, for example your first year of trading.
Under the new legislation, it will only be possible to file digitally using approved software.
And there will just be two filing options for small businesses: micro-entities and small businesses. This means there will no longer be the option to file ‘abridged accounts’ without a directors’ report and profit and loss statement.
The government says this will help to avoid confusion and reduce costly mistakes. It says it will also improve the value of the information on the register.
As a limited company you’ll be familiar with filing profit and loss accounts for HMRC, however all businesses will soon need to provide this information to Companies House too.
It’s not yet clear how detailed the accounts will need to be for Companies House but the government hopes this will increase transparency about registered companies.
Companies House registers limited company information, including directors and business accounts.
Here’s an overview of the key measures set to be introduced:
By bringing in measures like identity verification the government says it will give businesses assurance that the information on the register is genuine and stop fraudulent companies being registered.
Note that if you currently have audit exemption, you’ll need to provide an additional statement by the directors on the balance sheet.
Now that the bill has gained Royal Assent, you should expect the changes to start happening soon.
But any changes are expected to come into effect in phases, to allow for a smoother transition – as the updates are some of the most significant to happen in 180 years.
Companies House Chief Executive Louise Smyth said: “We will now play a much greater role in preventing further abuse of the register. We will be taking unprecedented steps to crack down on fraudulent activities, help victims quicker and clean up the register by removing information we know to be incorrect.
“This will underpin our efforts to improve the quality and reliability of our data, which will in turn hugely increase the value of the register for businesses across the UK and beyond.”
This article is intended as a guide. Always speak to a professional accountant or financial adviser if you’re not sure of anything.
How do the Companies House reforms affect your business? Let us know in the comments.
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Catriona Smith is a content and marketing professional with 12 years’ experience across the financial services, higher education, and insurance sectors. She’s also a trained NCTJ Gold Standard journalist. As a Senior Copywriter at Simply Business, Catriona has in-depth knowledge of small business concerns and specialises in tax, marketing, and business operations. Catriona lives in the seaside city of Brighton where she’s also a freelance yoga teacher.
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