Following the newly passed Economic Crime and Corporate Transparency Act, small companies will now have to file a profit and loss account and directors’ report with Companies House.
Who does this change affect?These new rules will affect small companies and micro entities. A small company is defined as either having a turnover of over £10.2m or less, £5.1m or less on its balance sheet or having 50 employees or fewer. A micro-entity is defined as having two of the following criteria, a turnover of £632,000 or less, £316,000 or less on its balance sheet, or 10 employees or fewer.
Audit exempt and dormant companies will need to file eligibility statements which confirm the company qualifies for the exemption being relied upon.
What is this change? Under the newly passed Economic Crime and Corporate Transparency Act, small companies and micro entities will now have to file a Profit and Loss account with Companies House. The option for abridged accounts will be removed under this new framework. A Profit and Loss statement is a financial report that shows your revenues, costs, and expenses over a period of time.
This legislative move is designed to make key financial data publicly accessible and ensures turnover is available on the public register. Failure to comply with these new requirements could result in penalties, however, the specifics are yet to be announced.
When will this change come into effect? Although this Bill has been in the pipeline for several months now, there is no indication of when the rules are going to be rolled out. A timetable for implementation of the new rules has not been set out, but any changes will not affect accounts due from 1 January 2024.
A Companies House spokesperson has said that companies will be given adequate warning on when this change will come into effect. At this moment in time, we don’t know what level of Profit and Loss will be required, the government is planning on issuing secondary legislation that will dictate the level of detail in this version of the Profit and Loss accounts for Companies House.
Why has this change happened? It was suggested that the minimal disclosures that small companies and micro entities are allowed to make do not give the level of transparency that is sufficient to get limited liability protection. The government’s aim with this bill is to make information more transparent in a view of tackling fraud and corrupt directors that form companies to commit money laundering.
Improving transparency and having better quality information will make it easier to spot fraud. However, people are concerned that this reform will cause a loss of privacy.
If this applies to you and you would like more information, or if you are at all unsure, you should get competent professional advice, contact us at info@oldfieldadvisory.com or call 02476673160 to find out more.
Please note: This article is provided for information only and was correct as at time of writing (13/11/23). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance. No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.
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