Companies House’s updated approach to enforcement and financial penalties

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The Economic Crime and Corporate Transparency Act 2023 (ECCT Act) is continuing to change the role of Companies House.

Some of the impact has already been seen, for example:

Some changes are yet to be brought into effect – for example, identity verification of officers and PSCs.

As part of the impact of the ECCT Act, Companies House have refreshed their approach to enforcement and financial penalties. We anticipate this will mean a more proactive approach to enforcement. Here we will outline the new guidance and how this is likely to impact accountants and others undertaking company secretarial work for UK companies.

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Inform Direct supports company secretarial compliance for hundreds of thousands of companies, so those using Inform Direct are already in a great position to maintain compliance and stay on the ‘right side’ of Companies House, avoiding fines and other enforcement action.

Is the likelihood of enforcement and financial penalties likely to change?

In 2024 we have seen a marked increase in the due diligence that Companies House are applying to companies. Some very clear examples of this have been:

  • Much more thorough checking of company names before they enter the register
  • Increased activity and communications to companies where they believe PSC records to be incorrect

Historically it has been very rare in our experience that Companies House issue financial penalties for late or incorrect filings. But with the increased scrutiny we are suddenly seeing in other areas and this updated guidance it is likely that action on late filings from Companies House is going to become more common.

When is this change likely to occur?

Following the ECCT Act we have seen an increase in enforcement by Companies House in other areas. Our expectation, therefore, is that the use of this guidance at Companies House will likely be starting from the date it was published, the 27th September 2024.

In the coming months we will likely start to see this new guidance play out and companies start to receive warning notices giving them 28 days to remedy any issues. If they don’t remedy in that time, we anticipate that financial penalties may often be imposed.

Why is there a change in the guidance due to the ECCT Act?

The ECCT Act as a whole is attempting to increase the reliability of the information held about companies at Companies House, both that publicly available and not. The goal is to reduce economic crime by increasing corporate transparency.

The guidance therefore sets out how Companies House will handle companies not complying with their filing obligations based on the following objectives provided in the ECCT Act:

  • Ensuring that filings/documents for companies are delivered to Companies House
  • Ensuring that information contained in the register (and therefore in filings provided to Companies House) is accurate
  • Minimising the risk of misleading the public due to the records kept about a company at Companies House
  • Minimising the extent to which unlawful activities can be carried out or facilitated by companies

To this end Companies House appear to be ‘stepping up’ their enforcement action on late and/or incorrect filings made by companies.

What is the updated approach?

When looking at any breaches (which could be filing something like a confirmation statement after the deadline), Companies House will used a risk-based approach when deciding how to proceed. This approach is set out in their ‘Compliance framework’.

This categorises the offending company into one of five levels based on their behaviour. Action is taken in line with that level.

Companies House Level framework

It is therefore best to keep your company in ‘Level 1’, so that if your company does have an issue in the future it will be in good standing with Companies House already.

Where there is a breach the enforcement methods that are available to Companies House are:

  • Communications provided to the company with information and advice on being compliant
  • A warning notice
  • Issuing financial penalties
  • Pursuing a civil case
  • Pursuing a criminal prosecution
  • Referring a case to other agencies

It is likely that any action by Companies House will escalate in this order starting from reminder/advice.

What is a warning notice?

Companies House may issue a warning notice if there is conduct relating to an offence stating:

  • The reason for the notice (i.e. you have not filed your company’s confirmation statement by the deadline)
  • How long you have to respond (at least 28 days)
  • How to deliver a representation
  • That a financial penalty may be imposed after the given response period

This is likely to be the main action that Companies House take. We expect companies will start to receive these in respect of late filings (e.g. confirmation statements that have not been filed on time), especially for those that file information late multiple times.

What to do if you receive a warning notice?

If you receive a warning notice you must either take the requested action (e.g. file the company’s overdue confirmation statement) within the time given, or make a representation to Companies House with the information you wish for them to consider.

A representation can be made by emailing [email protected] or writing to them (which may take longer) at:

Companies House
Crown Way
Cardiff
CR14 3UZ

If you do not act in the period given you will likely receive a penalty notice.

What are the penalties?

Where a penalty notice is issued it will contain the information about the reason for the penalty:

  • How much it is
  • How to pay it
  • The consequences for failing to pay it
  • And more…

There are two types of penalty:

  • Fixed penalties – a fixed amount based on the offence and historical behaviour
  • Daily rate penalty – a penalty that increases daily while the offence continues

Companies House can issue a penalty for an offence that is a combination of a fixed and daily rate penalty.

The amount of the financial penalty depends on the ‘Level’ assessment made using the previously mentioned guidance framework:

  • Level 3 offences are seen to be ‘Minor’.
  • Level 5 offences are seen as ‘Serious offences’
Penalty amounts

Where penalties are not paid Companies House may try to recover the debt via debt recovery agency or the courts.

If you still do not comply

By not complying following a warning notice and penalty notice you may be:

  • Issued further penalties – which could be daily, for each day that something remains unfiled
  • Prosecuted

What do you need to do?

As someone responsible for a company’s filing obligations with Companies House, either as a business owner, an accountant, a property manager etc. you need to be aware of your obligations with respect to Companies House filings and make sure you comply with them.

It is more important now than ever to make sure that you complete all filings accurately and on time to make sure the company remains in ‘Level 1’ of the framework, such that if something goes go awry the company is already in good standing at Companies House. This includes deadlines for filings like officer appointments, share allotments etc. that often companies historically have not paid too much to.

Accountants can find business opportunities in the increased importance attached to getting company secretarial work right:

  • Making company secretarial part of your client offering can help differentiate your accountancy firm
  • Accountants will be playing a direct and active role in helping clients avoid fines and other enforcement action
  • A well-organised cosec offering by an accountant will reduce time and effort spent responding to Companies House enforcement action
  • Company secretarial may be more likely to be seen as a core service required from an accountant
  • Clients who previously did cosec work themselves, and who might not have always filed correctly or on time, may now seek to rely on their accountant’s expertise

If you already use Inform Direct, just keep doing so and make use of the accounts and confirmation statement deadline tracking features to make sure you meet them. If not then you can start now!

Inform Direct is built specifically for this purpose, to help you manage your company secretarial duties for a company by:

  • Tracking and notifying you of key deadlines
  • Making Companies House compliance easy for you to achieve with our simple to use processes, which either:
    • Send the required information electronically to Companies House (where Companies House allow this)
    • Create the documentation you need to provide to Companies House (where Companies House do not allow electronic submission)

Inform Direct is kept up to date with legislative changes, enabling users to achieve company secretarial compliance

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