Current requirements
Under the current legislation, companies who are deemed to be small or micro entities can file ‘filled’ accounts at Companies House which exclude the directors’ report, audit report, profit and loss account and the profit and loss account related notes (other than the average employee note).
The thresholds used to determine whether an entity is small or micro are:
Small |
Micro |
|
| Turnover not more than | £10.2 million | £632,000 |
| Total assets not more than (total assets is the total of fixed and current assets) | £5.1 million | £316,000 |
| Average number of employees not more than | 50 | 10 |
The Economic Crime and Corporate Transparency Act (‘the Act’) was passed into law in October 2023.
The Act gives Companies House greater powers in tackling economic crime and provides more transparency for entities registered at Companies House. Many of the Act’s provisions will be implemented through secondary legislation.
What could change?
The Act contains provisions to remove the option to file ‘filleted’ accounts at Companies House for small and micro entities, to give greater transparency.
New requirements
When the secondary legislation is implemented, small companies will be required to file both their profit and loss account and Directors’ report, whilst micro entities will file their profit and loss account although will continue to have the option of not preparing or filing a Directors’ report.
So called abridged accounts, which contain a simpler profit and loss account and balance sheet structure, will also no longer be an option for small companies to prepare and file.
Whilst giving greater transparency, the Act does contain provisions that allow the profit and loss accounts of small and micro entities to be filed at Companies House but not made available on the public record, on the grounds of commercial sensitivity. It is not clear however how this will work in practice.
Potential implications
Directors need to be fully aware of these changes, as the implications of not being able to file ‘filleted’ or abridged accounts are clear.
Many stakeholders, including suppliers, customers and employees, will take a keen interest in the key operating metrics in the profit and loss accounts of entities, such as turnover, gross profit & profit before tax. There will also be sensitive matters disclosed including Directors’ remuneration.
When is this expected?
These measures will be implemented through secondary legislation and are not expected to be effective before late 2025 or early 2026.
To discuss the above and for further information, please get in touch.
