Changes to Company Accounts
There are significant changes proposed under the Economic Crime & Corporate Transparency Act 2023 (ECCTA) for how companies report their financial information and what financial information they must publicly report. This will particularly affect small and micro entities and the filing of their accounts, as these companies have, to date, been able to file public accounts with minimal information. The changes are designed to address the insufficient (and sometimes inaccurate) financial information currently on the companies register.
What is changing?
- All small companies must file complete accounts including a balance sheet, profit and loss account and a directors’ report.
- Micro-entities must file a balance sheet and a profit and loss account (a directors’ report is optional).
- Abridged and filleted accounts will be abolished.
- An eligibility statement will be required by companies claiming an audit exemption. This may particularly affect dormant companies. This aims to provide the Registrar with additional evidence to take stronger enforcement action for false audit exemption filings in the future.
The definitions of small and micro entities have not changed; therefore, a company is small if, in a year, it satisfies any 2 of the following criteria:
- a turnover of £10.2 or less
- £5.1 million or less on its balance sheet
- 50 employees or fewer.
A company is a micro-entity if, in a year, it satisfies any 2 of the following criteria:
- a turnover of £632,000 or less
- £316,000 or less on its balance sheet
- 10 employees or fewer.
Companies will need to consider how their published accounts will meet the new requirements, particularly if they have been abridged or filleted to date. In addition, companies will also need to consider what this increased public financial transparency will mean for their customers, suppliers, lenders, investors, and employees who will have much greater visibility of company accounts going forward. Whilst changes to company accounts will not be among the first measures to be in force under the ECCTA, companies would be advised to start planning for these changes and make sure that they have all necessary information and systems in place to comply with the new regime.
It is also proposed to mandate digital filing and full tagging of financial information in iXBRL format as well as reducing the number of times a company can shorten its accounting reference period. However, these changes are expected to happen at a later date after the initial implementation phase of the ECCTA.