Significant Companies House Reforms: Existing Companies Won’t Escape Identity Verification
Companies need to be aware of upcoming reforms at Companies House (CH) and how their business may be impacted. The reforms will include major changes to filing accounts, identity verification and protecting personal information on the register.
The changes – which CH calls the “biggest changes for Companies House and our work since we began registering companies in 1844” – will significantly change the role of CH. Its purpose will also change – and crucially, it will have greater powers in the fight against economic crime. Companies: be warned.
What’s changing?
Changes to accounts – CH will have power to decide how companies file their accounts and have already decided to move to software-only accounts filing as part of its “vision… to create a single, cost-effective, sustainable… secure, transparent and traceable” way of filing accounts. All other filing routes for accounts will disappear.
When will businesses be affected? The changes will be implemented once the Economic Crime and Corporate Transparency Bill is passed (expected to be this Spring), but will be rolled out on an incremental basis. There’s no need to wait until the Bill is passed before considering what you should do – the commercial software is already available, and businesses ought to make the transition now rather than delay until the last minute – and risk unexpected problems arising.
Small companies - Profit and loss requirements are changing and will impose a greater level of disclosure by small companies. Under existing rules, small or micro companies do not have to file a copy of its profit and loss account and/or the director's report with CH. However, CH has concluded this reduced level of disclosure has the potential to appeal to fraudsters
So what will change? There will be just two filing options – micro-entities and small companies; and it will no longer be possible to file abridged accounts – profit and loss accounts will need to be filed by small companies.
According to the Home Office, organised fraud in the UK costs businesses and the public sector £5.9 billion each a year. CH believes that the change will make it easier to spot fraud.
CH has acknowledged that some businesses’ filing habits will need to change and may face specific challenges in making the transition to mandated digital filing. It is prudent to prepare now rather than wait until the Bill is passed.
Personal information – The drive for increased corporate transparency means those individuals who are running companies must now publish their identities.
Balancing the publication of identities of directors (and people with significant control) with the need to protect against the abuse of publicly-available personal information has prompted CH plans to expand the right for individuals to suppress personal information in certain circumstances.
Currently, an individual may have the right to have their residential address suppressed. Under the upcoming reforms, individuals will also be able to request suppression – without needing to supply evidence - of other secondary information, such as dates of birth and signatures.
Where an individual can provide evidence that they are at risk of harm, for instance domestic abuse victims, from having personal information on the public register, they can request to have it protected.
Verification of identity - Individuals will have to verify their identity before being registered on the CH register. The aim is preventing fraudulent appointments being registered at CH.
Existing directors and companies will be dismayed to know that all directors and PSCs of existing companies will also be required to verify their identity within a set time period. The detail will be set out in secondary legislation.
To keep abreast of proposed reforms and when changes are to be introduced, read the CH blog here www.companieshouse.blog.gov.uk
If you would like us to cover an issue in the next NGM Tax Law Newsletter, we would be pleased to hear from you