The new Economic Crime and Corporate Transparency Act mandates that small companies and micro-entities will have to file at Companies House accounts, that for the first time, will need to include a profit and loss account.
Apparently, there is concern that a registered, smaller concern has not previously been required to file reports that disclose its turnover.
The form and detail of the profit and loss figures that will need to be filed have not yet been published and this change will require secondary legislation.
We will be keeping a close eye on these changes as many of the small company owners we act for may be dismayed by this apparent breach of their financial confidentiality. Allowing public access to profit and loss details may mean that major customers of companies will be able to see how much they contribute to their suppliers turnover. This may provide an opportunity to squeeze prices that will disadvantage the smaller concern.
The profit and loss disclosure may also expose to public view detailed costs including the remuneration of directors.
This particular change is part of a raft of new regulations that will be enacted by Companies House. In a recent announcement the Department for Business and Trade reported:
“The Department for Business and Trade has published a progress report on the implementation and operation of parts 1 to 3 of the Economic Crime and Corporate Transparency Act 2023.
“The act, which received Royal Assent in October 2023, seeks to address the threat of illicit finance while continuing to make it easy for legitimate commerce to do business.
“Parts 1 to 3 of the act cover:
- reforms of Companies House processes and new statutory functions and objectives for the Registrars of Companies
- reforms of the laws that apply to limited partnerships
- new provisions relating to the Register of Overseas Entities, which was introduced by the Economic Crime (Transparency and Enforcement) Act 2022
“Companies House delivered the first phase of reforms on 4 March 2024. This covered the systems, process and organisational change needed to operate the new registrars’ objectives and powers and new legal requirements for companies.
“The Department for Business and Trade will make progress reports to Parliament on the implementation and operation of parts 1 to 3 of the ECCT Act every 12 months until 2030.”
We will post more information on the specific change to profit disclosure as soon as the secondary legislation is published.