Major changes to filing for small companies will come into force shortly with compulsory profit and loss accounts and balance sheet disclosures Companies House will start streamlining the accounts filing options for small and micro-entity companies with the abolition of abridged accounts from 1 April 2027 and new more demanding reporting requirements.
Micro-entities will be required to file a copy of their balance sheet and profit and loss account at Companies House.
Small companies will be required to file a copy of balance sheet, directors’ report, auditor’s report (unless exempt) and profit and loss account.
The higher level of disclosure will improve transparency as companies will no longer be able to prepare and file abridged accounts, which must contain a simpler balance sheet, along with any notes. Currently, filing using this method has the benefit of not requiring a simpler profit and loss account or a copy of the director’s report.
There will be also be a requirement for more information when claiming an audit exemption. In future, any company claiming an audit exemption will need to give an enhanced statement from their directors on the balance sheet.
It will also clamp down on abuse of dormant company status.
Directors of dormant companies will need to specify which exemption is being claimed and 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.
Companies House warned: ‘Evidence from law enforcement agents show that some companies file dormant company accounts and claim the dormant audit exemption, despite their bank accounts clearly showing that the company does not meet the definition of a dormant company.’
From April 2027, Companies House will also curtail the number of times a company can change accounting reference periods to once in a five-year period.
‘We are limiting how many times a company can shorten its accounting reference period,’ Companies House stressed.
‘A company will have to provide a business reason if they want to shorten the period more than once within five years.’
The new framework is part of the Economic Crime and Corporate Transparency Act 2023, and the regulations are set out in section 396 Companies Act 2006.
These reforms are designed to ensure that the companies register is more reliable and accurate, and should give higher standards of disclosure and reduce fraud and error.
A company is ‘small’ if, in a year, it satisfies any two of the following criteria:
- a turnover of £10.2m or less;
- £5.1m or less on its balance sheet; and
- 50 employees or fewer.
A company is a ‘micro-entity’ if, in a year, it satisfies any two of the following criteria:
- a turnover of £632,000 or less;
- £316,000 or less on its balance sheet; and
- 10 employees or fewer.
‘These reforms achieve a better balance between greater transparency and minimising burdens on business. They address concerns about the potential impact of inaccurate or insufficient financial information on the companies register being used to inform important business decisions,’ Companies House stressed.
‘Ensuring all companies report sufficient information to determine a company’s size and eligibility to file under size specific regimes will improve the value and reliability of the information.’
To find out more about how this will affect your company and employees please contact your KKVMS advisor.