Economic Crime and Corporate Transparency Bill: Company accounts

This article forms part of a series looking at the measures to be introduced by the Economic Crime and Corporate Transparency Bill (“the Bill”), which intends to deliver a suite of wider-ranging reforms to tackle economic crime and improve transparency over corporate entities.

This article focusses on proposed changes to reform how companies report information and what information they report, when filing their annual accounts with Companies House.

What is proposed?

The government proposes:

• making filing obligations for micro-entities and small companies clearer;
• requiring small companies to file a profit and loss account and a directors’ report;
• requiring micro-entities to file a profit and loss account;
• removing the option to file abridged accounts;
• requiring an eligibility statement for companies claiming an audit exemption; and
• requiring documents to be delivered together, in cases where more than one document is filed, including for the filing of accounts.

Small companies and micro-entities

The government will streamline the existing filing framework for small and micro entity companies.

The Bill splits the filing obligations for small companies and micro-entities into separate sections of the Companies Act 2006 (“CA06”), with the aim of making the filing requirements clearer for companies to understand.

Under the new rules, micro-entities will be required to prepare annual accounts in accordance with the requirements of section 396 of CA06 (which requires the preparation of a profit and loss account), but the amendments retain the option for micro-entities to not prepare a directors’ report. Similarly, the amendments to the small companies filing requirements require the preparation of annual accounts in accordance with section 396. However, a small company will be required to file its profit and loss account and directors’ report. This will ensure that key information such as turnover is available on the public register. The changes will also remove the option for companies to prepare abridged accounts.

Companies relying on audit exemptions (including dormant companies)

An additional statement will be required by the directors when a company seeks to rely on an audit exemption (for example, dormant companies). The statement will require the directors to identify the exemption being relied on and to confirm that the company qualifies for the exemption. This additional statement is intended to act as a deterrent to criminal activity and to provide additional enforcement evidence.