Companies House changes affecting small companies in 2024

Companies House changes affecting small companies in 2024

Two significant changes are coming down the line in 2024 that will affect the filing of company accounts by small companies at Companies House
The changes fall in to two camps ... (i) digital filing and (ii) profit and loss accounts and directors' reports filing.

Digital filing

"Software-only filing" is the phrase being used by Companies House but it is really part of their digital alignment and their goal to operate a fully digital service.
Many accounts are already filed digitally, either through third-party accountants and auditors via their in-house software, or directly via Companies House online web services.
The changes towards a full 'software-only' filing requirement will be phased in over a 2 -3 year period. The details and timescales for this are expected to be published in 2024 now that the primary legislation is in place to support the move toward requiring all companies to file digitally.

Filing options

The main thrust of the changes in this area are around requiring both Micro and Small entities to file their profit and loss account.
The current accounts filing regime allows Micro and Small entities to file just a Balance Sheet and certain notes and they are not currently required to file their profit and loss account or directors' report.
The main rationale for this change seems to be not just combatting certain fraudulent activity, but also to provide more helpful public information to other stakeholders, such as lenders, credit providers, suppliers etc who currently do not get much useful information from filed accounts at Companies House for Micro and Small entities.
In summary, Small and micro-entity companies will need to file their profit and loss accounts. Small companies that do not qualify as micro entities will also need to file a directors’ report. Abridged accounts will also be abolished.
The detail of these new requirements is currently being worked out with Accounting Standards bodies and other business groups and we should expect to see more information emerging in 2024 around this along with a timescale for implementation.

Micro and Small Entity definitions

To qualify as a Micro entity, a company must meet any two of the following conditions:
- turnover must be not more than £632,000
- the balance sheet total must be not more than £316,000
- the average number of employees must be not more than 10

To qualify as a Small entity, a company must meet any two of the following conditions:
- annual turnover must be not more than £10.2 million
- the balance sheet total must be not more than £5.1 million
- the average number of employees must be not more than 50

Other changes

Identity verification - in essence, anyone who runs, owns, or controls a company in the UK will need to prove their identity to Companies House.
All parties to a new company will need to do their identity verification as part of the company formation and set up process.
Directors, owners and PSCs (people with significant control) of existing companies will be given a transition period in which to verify their identity with Companies House.
Identity proof will be able to be done either through AML regulated third-party agents (Accountants, Solicitors, Company Formation Agents, etc) or may be done directly via Companies House.
Once again, the timescale for putting this in place has not yet been published but is expected to be clarified early in 2024.

 

The legal bit

These changes are being brought about by the The Economic Crime and Corporate Transparency Act which received royal assent on 26 October 2023. Some changes will require further secondary legislation, for example changes to the small companies filing options.

Further information