What you need to know about Companies House reform

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Companies House is changing the way annual accounts are filed.

This comes as part of the Companies House reform plans laid out in the Economic Crime and Corporate Transparency bill. Companies of all sizes will need to use software filing, and the smallest companies will need to start submitting their profit and loss accounts.

For many practices, the changes could mean a swift transition to compliant software and a fresh approach to accounts preparation. In the short term, you might also see an increased workload.

In this brief guide, we go over the fundamental changes to Companies House filing requirements and how you can prepare.  

What are the new filing requirements for company accounts?

The new company filing requirements come in two parts:

  1. Company accounts will need to be filed using software only
  2. Small companies and micro entities will need to file their profit and loss accounts

There’s a good chance you’re already using software to file company accounts on your clients’ behalf. Soon, this will become mandatory for all company client types.

You’ll no longer be able to file paper accounts or use the free CATO (Company Accounts and Tax Online) or Companies House WebFiling service on behalf of clients. For larger, complex companies that can currently only use paper filing, software will be available before these requirements become mandatory.

Whereas before small companies weren’t required to file profit and loss accounts, this is now changing. Companies House will no longer accept abridged accounts either, in an effort to streamline filing options and standardise records on the register.

There are some other changes to Companies House requirements that could impact your clients. Be sure to check out the Companies House guidance on changes to UK company filing requirements, and update your practice team.  

Why are these changes being made?

In light of a recent spike in fraudulent activity on Companies House, a combination of software filing and profit and loss requirements will help to improve the quality of information on the register.

Currently, the smallest companies don’t have to file their profit and loss accounts or directors’ reports. But such minimal disclosure exposes the system to fraudsters, who pose as companies on the register. Public disclosure of accounts gives creditors and consumers more information to make better-informed decisions.

According to Companies House, these changes will help to improve the traceability, transparency and validity of account information – and thus lower the rate of economic crime.

When are the changes coming into place?

There’s no deadline in place for the Companies House changes yet. But you can sign up for email updates on Companies House reform. Rest assured, there’ll be plenty of time to get compliant software up and running before the changes come into effect. 

Which clients will be affected by these changes?

All company types will need to use software to file their accounts. Adopting a software package you can use with multiple client types will be essential for maintaining compliance and efficiency.

There are plenty of software packages out there that already support company types such as:

  • Dormant
  • Micro entity
  • Small
  • Full, unaudited
  • Community Interest Companies (CIC)

In time, all companies will need to have their accounts filed using software – not just the company types listed above. Companies House is working on solutions for company types that don’t already have software filing as an option.

Your guide to compliance with the new filing requirements

Soon, you’ll need to use software to file on behalf of all your company clients.

Without software in place, you won’t be able to submit annual accounts to Companies House. While specific penalties are yet to be confirmed, it’s likely your clients will be subject to the existing late filing penalties for non-compliance.

The good news is, software that complies with the Companies House changes already exists for many company types. You don’t need to wait until the Companies House changes come into effect. Get ahead by switching to software-only filing today.

Xero Tax makes accounts preparation and submitting returns a breeze. Xero partners get free access to Xero Tax – which means you can use it to submit company accounts on behalf of clients, today. When the Companies House changes come into effect, you won’t need to change a thing in your operations.

Avoid the last-minute software migration headache. Xero Tax is fit for the new Companies House rules and comes alongside a suite of practice management tools from Xero. So you can take care of bookkeeping, accounts production and tax returns all in one secure place.

Join over 200,000 accountants and bookkeepers using Xero in their practice today.

This content is brought to you by Xero.

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