The UK’s small businesses will have to file a profit and loss account with Companies House following the passing of new legislation in Parliament.
The passing of the Economic Crime and Corporate Transparency Act means that small firms including micro-entities will have to file a profit and loss account, with small companies having to also file a director’s report. This change ensures that turnover is available on the public register, and these companies are no longer allowed to prepare abridged accounts.
The Act defines a small company with two of the following:
• having a turnover of over £10.2m or less;
• having £5.1m or less on its balance sheet; or
• having 50 employees or fewer.
As for a micro-entity, the government defines these as having two of the following:
• a turnover of £632,000 or less;
• £316,000 or less on its balance sheet; or
• 10 employees or fewer.
A Companies House spokesperson said: “The requirements for a profit and loss account will be set out in regulations and we will ensure companies are given fair warning of the changed expectations. The secondary legislation and implementation programme is currently being finalised and further details will be communicated soon.”
In addition to the new profit and loss filing requirements, directors of companies that use audit exemption rules, such as dormant companies, will also have to provide additional information, including a statement to confirm the company qualifies for the exemption.
These requirements are part of a raft of new powers handed to Companies House to clamp down on fraud, including the rollout of identity verification for all new and existing registered company directors, people with significant control and those delivering documents to the registrar.
The government’s ambition is for the new requirements for small companies to lead to a “more reliable and accurate” companies register and that the information filed at Companies House is “closer to what companies have already prepared”.
The government said the reforms will “achieve a better balance between greater transparency and minimising burdens on business” while also solving the issue of inaccurate or insufficient information on the companies register.
“Requiring more information to be filed will reduce the risk of deliberate misuse of minimal disclosure options to hide money laundering and other fraudulent activity. Ensuring all companies report sufficient information to determine a company’s size and eligibility to file under size-specific regimes will improve the value and reliability of the information,” expanded the government factsheet.
“The requirements for a profit and loss account will be set out in regulations and we will ensure companies are given fair warning of the changed expectations. The secondary legislation and implementation programme is currently being finalised and further details will be communicated soon.”
Spokesperson, Companies House
