April 27, 2022 The end of accounting privacy for small firms?
Last month we wrote about the proposed overhaul of Companies House. Amongst the raft of measures, one area that has raised concern amongst some is proposed changes to accounting filing exemptions for small or micro businesses which make up the vast majority of the 4.4 million active companies on the register.
In the interest of reducing red tape, over time smaller companies have been afforded various exemptions when it comes to preparing and filing accounts. Currently, small companies and micro-entities may omit the directors’ report and profit and loss altogether, referred to as filleting.
However, findings from the government’s consultation on reform highlighted that steps to ease the red tape may have gone too far:
- the regime is now overly complex leading to confusion and errors.
- the information supplied is of little value or worse misleading (a common complaint from credit reference agencies and lenders)
- The system is open to abuse from fraudsters and some companies are claiming exemptions even when they don’t meet the eligibility criteria.
What’s the proposed change?
The key takeaway is that small and micro entities will be required to include a profit and loss account in their filed accounts, and this will be publicly available.
In addition, the option to file accounts on paper will be removed. All companies will now be required to ensure their filings are fully tagged and filed digitally (although 88% of companies currently do this anyway).
So what’s the big deal?
On balance, we think the reforms are probably overdue. For the majority of our clients, we expect there to be minimal additional red tape because most, if not all of the information is already being produced for HMRC.