You may have heard of The Economic Crime and Corporate Transparency Act (ECCTA).
It’s a bit of a mouthful isn’t it, but the changes detailed out in the legislation will have an impact on small businesses over the next few years.
In the words of the Government, the ECCTA is:
It follows the Economic Crime (Transparency and Enforcement) Act of 2022.
The act is aimed at delivering a more stringent companies register. The reality of course is that the changes included will be felt by almost all small businesses.
So, if you’re a Director of a business you should be aware of the changes afoot and the impact they could have on you and your business.
Having reviewed all the information available on Companies House we’ve pulled out what we believe to be the key impacts for small business.
The Key Impacts for Small Business
1. Increase in fees
Almost all Companies House fees are going up. This includes the regular ones such as confirmation statement filing fees and incorporation fees. There are also new fees for changes that were previously free such as a change of company name.
2. Change to registered office addresses
PO box addresses will be banned, meaning documents should be delivered to a location where someone is working on behalf of the company.
3. Confirmation statement changes
On incorporation and on each confirmation statement the company will be required to confirm that it is being established for a lawful purpose and that its ongoing future activities will continue to be lawful. There’ll also be a requirement to provide a registered email address on the confirmation statement.
4. Stricter identity verification
Directors and People with Significant Control (PSC) of all new companies will be required to verify their identity prior to incorporation. There will also be a transition for all existing companies Directors & PSC’s to verify their identity but the exact timing of this transition is currently unknown.
5. Accounts changes
Some big changes are coming down the line here. They include a requirement to file profit and loss accounts for small & micro-entities and the removal of the option to file abridged accounts.
Raw Founder, Luke’s thoughts on the Companies House changes:
“At times legislation can feel like a sledgehammer being used to crack a nut. These rules are to clamp down on the rise in fraud seen during COVID, alongside a changing international landscape that sees companies being formed in the UK by overseas Directors/Shareholders some of whose intentions are not always lawful. However, the rules will impact many unsuspecting, legitimate companies. The changes to Limited company accounts filings to include a profit and loss account, in particular, is significant but we are still waiting on clarification as to exactly what will need to be published”
All changes in more detail…
(Information below is taken from Companies House guidance you can read at the link.)
Changes to Companies House Fees – in force from 1 May 2024
One change that has recently been announced is amendments to Companies House fees. You can view the full range of fee changes here – but below we’ve highlighted the ones you’ll most commonly pay. These new fees will come into effect from 1 May 2024 so we urge you to familiarise yourself with them.
We’ve pulled out the three most significant fee changes that will impact the small business owners we work with at Raw. As we predominately operate digitally, we’ve focused on the ‘digital’ submissions over ‘paper’.
Changes to company incorporation and registration fees:
- Digital confirmation statement will rise from £13 to £34
- Digital Incorporation fee will rise from £10 to £50
- Digital change of name will rise from £0 to £20
Whilst these changes are the ones that will have the most impact on the majority of Raw’s clients we encourage you to review the full range of fee changes here.
Improving the quality of data on their registers
Changes are effective from 4 March 2024 but secondary legislation is needed so the date is dependent on the parliamentary timetable.
Registered office addresses:
- You will no longer be able to use a PO Box as a registered office address, as companies will be required to always have an ‘appropriate address as their registered office address’. What this means is documents should come to the attention of someone working on behalf of the company and documents being delivered should be recorded by an acknowledgment of delivery.
Statement of lawful purpose:
- When you register/incorporate a company you’ll have to ‘confirm’ that it’s being formed for lawful purposes. A company will also need to confirm its intended future activities are lawful on their annual confirmation statement.
Registrar’s powers:
- The registrar will be given greater power to query incorrect/inconsistent information.
Enforcement and sanctions:
- Consequences to be introduced if a company does not respond to formal requests from Companies House, including penalties, annotation on the company’s record or in the extreme prosecution.
Confirmation statement changes
In force from 4 March 2024
Registered email address:
- All new companies to provide a registered email address on incorporation. Existing companies without an email address will be expected to provide one when they next file their confirmation statement for confirmation statements dated after 5 March 2024.
Statement to confirm the company is lawful:
- As previously referenced above a company will need to confirm its intended future activities are lawful, on their annual confirmation statement. This will apply to all confirmation statements with a date of 5 March 2024 onwards.
Identity verification
Changes to come into effect over the coming months
- All new companies, directors and people with significant control will need to verify their identity. The identity verification will apply to other types of registration, for example any members of a Limited Liability partnership.
- With regards to existing companies, all directors and people with significant control will have a transition period to verify their identity with Companies House.
- Anyone acting on behalf of a company will need to verify their identity before they can file information with Companies House.
- You will be able to verify your identification directly with Companies House or via an authorised agent such as Raw.
Changes to accounts
Digital filing of accounts:
- There will soon be a move to filing accounts by software only – companies will need to ensure they have the appropriate software to file digitally. Most companies can make the change now as software is currently available. At Raw, almost all submissions are via software so this is not expected to have a significant impact.
Changes to small company filing:
- Small and micro-entity accounts will need to file their profit and loss accounts. Small companies that do not qualify as micro entities will also need to file a directors’ report. The option to file ‘abridged’ accounts will be removed. The detail of what will need to be filed is to be included in additional legislation which we are still waiting on.
Claiming an audit exemption:
- Any company 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.
Improving transparency of company ownership
Date to be confirmed on when measures will come into force
Companies must:
- Record the full names of shareholders who are individuals – or the full names of corporate members and firms – in their registers
- Provide a one-off full shareholder list so Companies House can display shareholder information in a more user-friendly way
To summarise, there’s change coming and if you’re a director of a business it’s important to be aware of what’s on the horizon so you’re not caught out. A good quality accountant will ensure you’re kept abreast of important industry news and updates. If you’re seeking the support of an accountant and are looking for a firm that stays ahead of the curve, contact Raw today.
