July 8, 2025 Controversial Accounting Reforms on hold in government U-Turn
Last week, Companies House had just hit send to companies announcing a date for new accounting reforms, when the government seemed to change its mind.
What Was Going to Change?
The reforms passed under the Economic Crime and Corporate Transparency Act 2023 (ECCTA), aimed to improve data quality and transparency at Companies House. The changes included:
- Software-only filing: Accounts could only be submitted using approved software, and no longer through paper or using the Companies House web service.
- Micro-entities would need to file both a balance sheet and profit and loss statement. Abridged accounts would be abolished.
These reforms have been unpopular with small business since they were first announced by the Conservative government; however, the debate was reignited two weeks ago when we learned the date for compliance would be 1 April 2027.
Latest Announcement
According to reports in the Financial Times (3 July 2025), a government spokesperson confirmed that Business Secretary Jonathan Reynolds is reviewing the planned changes to reduce the regulatory burden on small companies. An ally of Reynolds was quoted saying:
“This will not happen as long as Jonny is in place. It doesn’t fit with our plans to cut regulation.”
Financial Times, 3 July 2025
These comments follow the new government’s industrial strategy announcement last month, which set a target of reducing administrative burdens on businesses by 25%.
What This Means
The direction of travel towards greater transparency has remained consistent in recent years; however, this is one of the rare occasions where the government has pressed pause on an aspect of the ECCTA reforms.
Given the communications from Companies House last week, it’s important to be aware of this change in government position. We’re closely monitoring how this policy reversal unfolds and what it means for small companies.
For our existing accounting and tax clients, there is no immediate action, our accounting service already includes compliant electronic filing using Xero, of which Elemental is a Platinum champion partner or IRIS, the largest provider of such software to the UK market.
If your business is uncertain about how these developments affect your filing obligations, or if you’re relying on paper-based or web-submitted accounts, please get in touch and we would be happy to explain the options available to you.
