Back in March 2022, we reported how small companies would lose the option to submit filleted or abridged accounts. In essence, this meant that all companies would be required to file a profit and loss account to Companies House each year. This change has now come a few steps closer with the passing of the Economic Crime and Corporate Transparency Act.
Why are the changes happening?
The government’s concerns about money laundering deepened after war erupted in Ukraine. At the same time, Companies House is working towards becoming a totally digital organisation.
The changes the government wanted to implement were:
- Making companies use iXBRL to file digitally tagged accounts. This will allow simpler comparison with information held by HMRC.
- Ensuring accounts can only be filed by someone with a verified identity.
- Axing filleted and abridged accounts for smaller companies.
What are the changes regarding profit and loss accounts?
Currently, smaller businesses can submit abridged or filleted accounts. Abridged accounts include a profit and loss account and a balance sheet, but they don’t contain comprehensive information. Filleted accounts allow companies to omit some reports, such as the profit and loss account and the directors’ report.
To qualify for submitting abridged or filleted accounts, your company has to meet two of the following criteria:
- A turnover of £10.2 million or less
- A total balance sheet that doesn’t exceed £5.1 million
- Average employee numbers of no more than 50.
Very small businesses are also allowed to submit ‘micro-entity’ accounts. These can also be filleted so that only a balance sheet with footnotes is publicly available. To qualify as a micro entity, your company must meet two of these criteria:
- A turnover of no more than £632,000
- £316,000 or under on your balance sheet
- 10 employees or fewer.
What accounts will I have to submit?
In essence, all companies will soon have to submit a profit and loss account. This means that turnover will be available on the public register. Small companies will also have to submit a directors’ report, although micro-entities will not. Submitting abridged accounts will no longer be possible.
When will the changes apply?
Currently, there is no date for the new rules to come into force. However, Companies House says the requirements for profit and loss accounts will be set out in regulations. Firms will be given fair warning of the changes, and we will alert you to them on this blog.
What will the new rules mean for me?
The rules mean that companies will have to be more transparent about their finances.
On the plus side, this may make it easier to secure credit. This is because credit rating agencies will be able to consult more detailed financial information.
On the other hand, competitors will be able to access details about your turnover and profit margins. This could give them strategically useful information. However, this will be a double-edged sword as you’ll be able to access comparable information about your competitors.
That said, having a verified identity with Companies House will not only reduce money laundering, but will help protect you from identity theft.
Can THP help with my profit and loss accounts?
THP can help you with all your reporting requirements. Whether you need us to prepare compliant accounts or, for larger firms, undertake an audit – we can help. Simply get in touch with our expert team today to find out more.
About Shahid Hameed
Shahid Hameed is a Director of THP and works on auditing, management accounts and personal tax matters. Being a Responsible Individual (RI) for the firm he also signs off audits.
As the firm’s Money Laundering Compliance Officer (MLRO) it is one of Shahid’s responsibilities to ensure that THP remains on top of all internal compliance matters and that the THP team is trained and up to date with AML compliance legislation.
In addition to general audits, Shahid specialises in charity audits and solicitors client money rules.
Having worked with Foulds & Grant before the merger with THP, Shahid has built up calm, honest and respectful relationships with his clients. Further development and promotion to Director within the firm in 2023 provided Shahid with more opportunity for greater variety in his work which he very much enjoys.
A keen sports fan, Shahid follows cricket around the world.
Shahid’s specialist skills:
- Annual Accounts
- Management Accounts
- General Audits
- Charity Audits
- Accounting for solicitors and legal firms
- Training and Compliance