The Economic Crime and Corporate Transparency Act gained Royal assent in October 2023. This Act introduces widespread Companies House reforms and changes to current rules for companies, partnerships and directors in 2024 and beyond.
The Economic Crime and Corporate Transparency Act creates a more significant role for Companies House and increases corporate transparency. Its aim is to improve company information and play an increased role in tackling economic crime and supporting economic growth.
There will be new responsibilities for:
- all new and existing registered company directors
- people with significant control of a company (PSCs)
- anyone who files on behalf of a company
If you are a corporate director, you should read on to find out what you should be providing Companies House in future. In this blog, we’ll cover the key changes covered by this act and new legislation.
What are the new measures designed to do?
The new measures of this Act will:
- broaden and give new powers to Companies House to become a more active gatekeeper over company creation and improve the reliability of data
- ensure that more reliable and accurate financial information is kept on the company register, reflecting the latest advancements in digital technology and help directors to make better business decisions
- provide more effective powers of enforcement to Companies House and increase their ability to share relevant information with partners and law enforcement agencies
- protect individuals from fraud and other harm by enhancing the protection of personal information.
The measures are designed to crack down on economic crime and potentially fraudulent companies.
Enhanced Companies House powers
The act aims to clamp down on fraudulent organisations and verify company directors by enhancing the powers that Companies House have to share and query information. It also strengthens rules around information sharing, corporate transparency, the seizure and recovery of crypto assets and anti-money laundering powers.
What are the changes to UK company law in 2024?
Identity verification measures
Individuals setting up, running, owning or controlling a company in the UK will need to comply with new identity verification requirements. Introducing identity verification measures will improve the information on new and existing directors.
Confirmation statement changes
A confirmation statement confirms the information that Companies House hold about that company is up to date. Currently every UK company, (even dormant and non-trading companies) must file a confirmation statement at least once a year - but you may choose to file more often. This confirmation statement is required even if there have not been any changes during the period.
The new act will mean that additional information needs to be completed on the confirmation statement. This additional information requires all UK companies to confirm every year that the intended future activities of the company will be lawful.
These changes apply to all confirmation statements with a statement date from March 2024 onwards.
Registered office address
There are new rules for a company’s registered office address held on the companies register, meaning all companies must have an appropriate address at all times. Companies will not be able to use a PO Box as their registered office address.
Registered email address
All companies will be required to provide Companies House with a registered email address. Companies House will use the email address to communicate with the company, but this email address will not be available on the public register.
This will be a requirement for existing companies when they file their next confirmation statement from March 2024.
For all new companies that are incorporating, a registered email addresses will be required. This will be required by companies that incorporate, from March 2024.
Company ownership transparency
Additional shareholder information will be required to be notified to Companies House and there will be restrictions on the use of corporate directors.
Financial information and filing changes
Companies House are focused on getting all companies towards filing accounts by software only, and there are changes also to small company accounts filing options.
This change is designed to ensure efficient and secure filings for all limited companies and private sector bodies and will improve the quality of the data on the Companies House register.
Companies currently not using online accounting software currently should find suitable software before web-based and paper filing options are no longer available. This will apply to individuals filing accounts themselves, and companies who use other third-party agents or accountants to file their annual accounts.
Although this changed will be phased in over the coming 2-3 years, there is no set timetable released yet by Companies House, so our advice if you are not currently using online accounting packages, to begin to change over as soon as possible.
Changes to small and micro-entity company filing options
Companies House are streamlining the accounts filing options for small and micro-entity companies,
Small and micro-entity companies will need to file their profit and loss accounts.
Your company will be ‘small’ if it has any 2 of the following:
- a turnover of £10.2 million or less
- £5.1 million or less on its balance sheet
- 50 employees or less
Micro-entities are very small companies. Your company will be a micro-entity if it has any 2 of the following:
- a turnover of £632,000 or less
- £316,000 or less on its balance sheet
- 10 employees or less
We are awaiting confirmation of secondary legislation to understand what they will need to include. There will also be the removal of option of filing abridged accounts. Small companies that do not qualify as micro entities will also need to file a directors’ report.
What do companies need to include in their annual accounts?
The new filing rules mean small and micro-entities will need to prepare their annual accounts to comply with ’section 396’.
Section 396 is the legal framework that sets out what information limited companies have to provide when they submit their accounts. The information required includes:
- The area of the United Kingdom in which the company is registered (e.g., Wales, Northern Ireland, Scotland or England)
- The company registration number
- The company’s registered office address
- Whether the company is a public or a private company
- If the company is limited by shares or by guarantee
- The balance sheet as of the last day of the company’s financial year
- The profit and loss account as at the last day of the financial year
- Where needed, confirmation if the company is being wound-up
Claiming an audit exemption
Companies claiming an audit exemption will need to give an additional statement from their directors on the balance sheet.
Directors will need to specify which exemption is being claimed and confirm that the company qualifies for the exemption.
Your company may qualify for an audit exemption if it has at least 2 of the following:
- an annual turnover of no more than £10.2 million
- assets worth no more than £5.1 million
- 50 or fewer employees on average
You must include the following statement on the balance sheet of your accounts if you’re using an audit exemption.
For the year ending [your company’s year end date], the company was entitled to exemption from audit under section 477 of the Companies Act 2006 relating to small companies.
The members have not required the company to obtain an audit of its accounts for the year in question in accordance with section 476.
The directors acknowledge their responsibilities for complying with the requirements of the Act with respect to accounting records and the preparation of accounts.
These accounts have been prepared in accordance with the provisions applicable to companies subject to the small companies’ regime.
Changes to limited partnerships
Limited partnerships (LPs) will need to file more information in future at Companies House and will be required to file their information through authorised agents (also known as an Authorised Corporate Service Provider) that’s registered with Companies House such as accountants like dns.This is to make sure the data is trustworthy and fit for purpose.
There will be new powers for Companies House to:
- close and restore limited partnerships
- apply sanctions
- protect partner’s information
- operate a statutory compliance process
When the measures come into force, LPs must:
- provide partner’s names, date of birth and usual residential address
- verify the identity of general partners
- provide a registered office within the UK
- provide a standard industrial classification (SIC) code
- file an annual confirmation statement
Secondary legislation is required before these measures are implemented.
Data sharing, investigation and enforcement
Companies House will have increased powers to undertake more rigorous investigation and enforcement powers to share data on companies and individuals with law enforcement agencies and other government departments.
Data protection and the public register
Individuals will still have the ability to suppress personal data from historical documents and can apply to have their personal information protected from public view to prevent risk of harm.
Register of overseas entities
The Register of Overseas Entities came into force in the UK on 1 August 2022 through the Economic Crime (Transparency and Enforcement) Act 2022. The register is a major part of the government’s strategy to tackle global economic crime.
Overseas companies who buy, sell or transfer property or land in the UK must register with and notify Companies House who their registrable beneficial owners or managing officers are.
The period for transition has now ended and there are already more than 30,000 entities registered. More than 9,000 update statements have been filed so far, and penalties have begun to be issue for non-compliance with the legislation.
Will the changes affect all UK companies and directors?
The changes affect all UK limited companies, corporate structures and limited partnerships, including dormant and non-trading companies.
What are the objectives of the new measures in 2024?
This wide-reaching reform of company legislation introduces a series of changes designed to improve company information, reduce crime, improve corporate transparency and strengthen Companies House powers in the UK. It is believed it will deliver improvements for the UK economy, national security, reduce money laundering and be key in tackling economic crime in the UK.
What should your company do?
For some companies, these changes and new regulations will require accountings system upgrades and changes to financial practices. Secondary legislation is required from Companies House on some of the changes, meaning that some aspects like identity verification, may not be immediate. However, initial roll-out of many of these reforms are happening now and throughout early in 2024.
However, you should begin to prepare for these changes by talking to your accountant about what it means for you as a director/shareholder and the company.
If you are not currently using online accounting software, then you should work with your accountants to begin the transition now.
If you are a company director and/or a person with significant control ( PSC ) you need to ensure you are compliant with all the changes.
Early measures rolled out in 2024 include enhanced scrutiny of information by Companies House, stricter checks on company names, new rules for registered office addresses, mandatory requirement of a registered email address, and annual confirmation statement changes.
Companies House have said they are aiming to roll all these changes out in their entirety over the next few years but have not given a timeline beyond that as secondary legislation is required in some areas.
Burying your head in the sand and trying to hide any offshore issues can lead to serious consequences. Full cooperation and submitting a full and accurate disclosure with accurate tax liabilities calculated can avoid more serious consequences such as higher penalties and interest or a criminal prosecution.
To discuss how these changes will impact your accounting, annual filing or Companies House information submitted, speak to a member of our team today by contacting us on 03330 886 686, or you can also e-mail us at firstname.lastname@example.org.
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