The Economic Crime and Corporate Transparency Act (ECCTA) has introduced a set of changes to how companies file their accounts with Companies House. Here we lay out what we currently know about the coming changes and how they will affect company officers and accountants.
When will the changes come into force?
Companies House have offered reassurance that they will allow sufficient time for companies and accountants to get prepared for the changes. The new laws are likely to be implemented in several phases, with the changes to the simplest accounts (dormant and micro-entity accounts) most likely to be implemented first. Others will become more clearly defined through secondary legislation and may come into force as late as mid-2025.
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Moving towards software-only accounts filing
By mid 2025, Companies House aims to have completed the move towards software-only accounts filing. This means mandatory digital accounts filing via approved software, with full iXBRL tagging. We have already built full iXBRL tagging into Inform Direct in preparation for this move.
To effect the transition to software-only accounts filing, other accounts filing routes will be removed:
- Paper filing
- WebFiling, Companies House’s online filing service.
As part of this change, Companies House is also decoupling from CATO (Company Accounts and Tax Online service), the joint filing service that Companies House has with HMRC. HMRC can continue to use CATO, but it will no longer form part of the Companies House ecosystem.
This could have a significant impact on smaller accountancy firms which are more likely to be using these services. They will be required to find and use compliant accounts filing software, and to file accounts and tax returns separately for the time being (though potentially via the same software, which should reduce the need to input the same data twice). Companies House are reviewing the criteria for recognised software vendors and are considering a single joint list with HMRC.
The Registrar gains the power to require that all elements of a filing be delivered together, which is intended to facilitate the digital filing of more complex accounts. For companies that currently paper file either because their accounts are complex and consist of multiple elements, or because they have to include other forms (such as CICs), the existing Companies House upload service will be upgraded to allow all the various components to be submitted via software as a package via a zip file. This will be particularly relevant for limited partnerships, groups, CICs and audit exempt subsidiaries. The zip portal is projected to enter service during 2024.
Small company and micro-entity accounts filing changes
The Act provides for measures to make all companies’ turnover and profit or loss available on the Companies House register. The stated aims are to reduce fraud and make filing requirements easier to understand.
Small companies no longer have the option to file abridged accounts. They must file a complete set of accounts: balance sheet, income statement (profit and loss account) and directors’ report.
Micro-entities must now file an income statement (profit and loss account) where previously they were only required to file a simplified balance sheet. Filing a directors’ report remains optional for micro-entities.
The format and level of detail required in small and micro-entity accounts filings will become clearer when the relevant secondary legislation is issued. There is no firm timeline for the rollout of these rules, but they are projected to come into force in early 2025.
Dormant companies and the ‘eligibility statement’
The Act introduces a requirement for all companies claiming an exemption to add a statement to their balance sheet that:
- Identifies the exemption
- Confirms that the company qualifies for the exemption.
This includes dormant companies that rely on an audit exemption. The aim is to reduce the false filing of dormant company accounts by businesses that do not meet the dormancy criteria. The new statement adds a layer of evidence for the Registrar to use when taking enforcement action against false audit exemption.
Limit on shortening accounting reference periods
Companies House will be tightening the rules that govern the number of times a company can shorten its accounting reference period. Some companies have abused the flexibility available in order to gain additional time to file their accounts, and the Act introduces a measure to remedy this. It’s good for accountants to be aware of this change, even though it won’t affect the majority of company accounts filings.
The limits upon when a company can shorten its accounting reference period will be introduced in secondary legislation to bring it in line with existing limitations on the number of permitted extensions of the accounting reference period.
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