Changes set to affect small companies’ filing requirements
The Economic Crime and Corporate Transparency Act (ECCTA), which was recently passed in Parliament, introduces mandatory changes for small companies. This signifies a significant shift in transparency and reporting but what are the implications for small companies?
5th February 2024
Laura Seaward See profile
One major change is that small companies, including micro-entities, will now be obligated to submit a profit and loss account to Companies House. This change aims to make turnover data accessible to the public. Additionally, small companies will also be required to file a Director’s report, and the option to prepare abridged accounts will be removed.
There are some regulations currently being considered by parliament which could mean some profit and loss accounts for small or micro businesses, or parts of them, may not have to be made available for public inspection. However, how, or in what circumstances, this provision can be applied is still being considered.
To understand how these new rules will apply, let’s break it down:
Small company: Defined as meeting two of the following criteria: turnover of £10.2 million or less, balance sheet value of £5.1 million or less, or 50 employees or fewer.
Micro-entity: Described as fulfilling two of the following criteria: a turnover of £632,000 or less, balance sheet value of £316,000 or less, or 10 employees or fewer.
While the Economic Crime and Corporate Transparency Act has been in the works for some time, there is no set timetable for its implementation. Companies House assures us that the requirements for a profit and loss account will be outlined in forthcoming regulations, ensuring companies have adequate notice of the evolving expectations.
These requirements are part of a broader initiative to combat fraud. Companies House is gaining new powers, including identity verification for Directors and individuals with significant control. The government aims to create a more reliable and accurate register of companies, reducing the risk of misuse and money laundering while improving the quality of information available.
A profit and loss account contains turnover and profit/loss figures, amongst other information, which can be commercially sensitive for some businesses.
Competitors will soon be able to see exactly what turnover or profits their competitors are generating and smaller businesses could experience a weak competitive advantage against their larger counterparts and potentially lose customers as a result.
Stay informed about further updates regarding the new filing requirements.
Prepare your company to comply with the obligation to file a profit and loss account. Now is the perfect time to review your profit and loss account and ensure that your reporting accurately reflects the performance of the business.
For example, is your gross profit really your gross profit or are some costs misallocated in either the cost of sales or operating expenses?
The evolution of filing requirements for small companies signifies a significant shift toward transparency and accountability in the business world. If you want to explore this further, or any other financial matter concerning your company, please get in touch with your usual Old Mill contact or click here…