Companies House to axe filleted and abridged accounts

Each year, many SMEs submit filleted or abridged accounts to Companies House. If you submit abridged accounts, you don’t have to disclose your net profit or a detailed breakdown of creditors, debtors or fixed assets. With filleted accounts, you don’t have to submit your profit and loss account or a directors’ report.

However, these options will soon become unavailable. There are two main reasons for the change. First, Companies House intends to become a completely digital organisation. Second, concerns about money laundering have come into sharp focus in the wake of the war in Ukraine. As a result, government now is accelerating proposed changes to the way Companies House operates. These changes have been detailed in the Economic Crime and Corporate Transparency Act (ECCTA), which became law on 26th October 2023.

How annual accounts submissions will change

Most of the measures in the ECCTA will be enacted by secondary legislation. As a result, we don’t have a clear timetable for when filleted or abridged accounts will be abolished. When the changes are introduced, companies will have to use iXBRL to file digitally tagged accounts. This will make it much easier to compare accounts with information held by HMRC, theoretically making it simpler to spot irregular activity.

Companies House will also have significant new powers. If you file accounts, you’ll need to have a verified identity. The organisation will be able to share data with a range of authorities. If company directors or secretaries don’t comply with their responsibilities – or make sure their information is correct – they will face fines.

Filleted and abridged accounts

While submitting your annual accounts will become simpler, Companies House will no longer offer options for submitting either filleted or abridged accounts. This means all companies, regardless of size, will have to submit a profit and loss account, along with a balance sheet. However, micro-entities will not have to submit a directors’ report. A micro-entity is currently defined as a business with two of the following:

• a turnover under £632,000
• £316,000 or less on its balance sheet
• 10 employees or fewer.

What the changes mean for your business

Unfortunately, the changes mean smaller businesses will suffer a loss of privacy. Their detailed accounts will be publicly available, including to competitors. Potentially more positive, credit rating agencies will have access to more detailed financial information about your company. This could make it easier to secure credit.

Also on the plus side, because directors will have to have a verified identity with Companies House, identity theft will become much more difficult.

When will filleted and abridged accounts be abolished?

As we said, there is currently no deadline for the abolition of filleted and abridged accounts. However, if you currently submit these types of accounts, you need to be aware that these will be withdrawn in the relatively near future. We will update this post as soon as we know then the changes will be introduced. If you’re a THP client and you have any questions about this or any other business topic, please do get in touch.