The government has confirmed that small companies and micro-entities will have to file profit and loss accounts with Companies House from April 2028, bringing clarity to a reform that had appeared to be in doubt.
Companies House originally intended to introduce the changes in April 2027, before pausing the plans last year following criticism from accountants, business groups and company owners.
At the time, some commentators wondered whether the proposal had effectively been shelved.
Instead, the government has announced that the changes will go ahead, albeit with a one-year delay.
Profit and loss accounts still required
Under the revised timetable, small companies and micro-entities will still be required to submit profit and loss accounts to Companies House. However, one of the most controversial aspects of the original proposal has been softened.
Importantly, companies will be able to choose not to make their profit and loss accounts publicly available. The information will still be provided to Companies House, HMRC and law enforcement agencies, but it will not necessarily appear on the public register.
That distinction is likely to be welcomed by many contractor limited companies.
When the plans were first announced, one of the biggest concerns was that competitors, clients or suppliers could potentially gain access to commercially sensitive information. For one-person companies and specialist consultancies, even basic profitability figures can reveal more than directors may be comfortable sharing.
Christian Hickmott of Integro Accounting believes the government’s revised approach addresses much of that concern.
“Many directors were worried that commercially sensitive information could become freely available to competitors. The revised approach appears to strike a balance between providing regulators with more information while preserving a degree of privacy for smaller businesses.”
Move to fully digital filing
The reforms form part of the wider Economic Crime and Corporate Transparency Act programme, which is gradually giving Companies House greater powers to verify information and improve the quality of data held on the register.
Alongside the profit and loss filing requirement, the government has confirmed that accounts filing will move fully online.
Paper submissions will disappear, as will the Companies House web filing service currently used by many smaller businesses. Instead, accounts will need to be filed using commercial software and submitted in iXBRL format.
For many contractors, that may prove more significant than the profit and loss requirement itself.
Most limited companies already prepare full accounts and Corporation Tax returns each year. The information exists already. The difference is that Companies House will now receive a fuller picture of a company’s finances and the filing process will become entirely digital.
Richard Creedon, Product Compliance Manager EMEA at Intuit, described the reforms as one of the biggest changes to Companies House filing requirements in years.
“This is one of the biggest changes to Companies House filing requirements in years and will affect millions of UK businesses.”
He added that most businesses already prepare the information required for tax purposes and that the largest change will be the move towards digital reporting.
Michael McCullion, founder of Bright Ideas Accountancy, takes a similar view.
“Most limited companies prepare full statutory accounts and Corporation Tax returns each year, so the underlying accounting information exists. The bigger change is likely to be the move towards mandatory digital filing and the withdrawal of paper-based submission methods.”
What it means for contractors
According to Companies House, around 4.7 million small companies and micro-entities will eventually be affected by the changes.
For contractors, the practical impact is likely to depend largely on how they currently operate.
Those already using cloud accounting software and working with an accountant (likely to be the vast majority of contractors) may notice very little difference. Directors who still rely on older filing methods have almost two years to prepare.
The announcement also removes the uncertainty created by previous announcements and press speculation.
The final version of the reforms is less far-reaching than many directors initially feared. The ability to keep profit and loss accounts out of public view preserves a degree of financial privacy that many directors were concerned would be lost altogether.
You can read the official announcement here.
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