Overview
The Act introduces amendments to the Companies Act 2006 that will make the filing requirements for micro-entities and small companies clearer to understand. The changes will ensure that key information such as turnover is available on the public register and will also remove the option for companies to prepare abridged accounts.
The Act also introduces a requirement for companies relying on an audit exemption to identify the exemption being relied on and to confirm that the company qualifies for that exemption.
Legislative powers under the Act also allow for mandatory digital filing of accounts.
Companies House has announced that these measures will be effective from 1 April 2027.
Company accounts
The Act amends the Companies Act 2006 (CA 2006) to streamline the existing filing framework for small and micro entity companies. The reforms focus on what information is filed at Companies House and not on the underlying obligations for companies to prepare accounts. The reforms will mean that what is filed is closer to what companies have already prepared.
The rationale for these changes is to reduce the risk of deliberate misuse of minimal disclosure options to hide money laundering and other fraudulent activity.
A company is ‘small’ if, in a year, it satisfies any two of the following criteria:
- a turnover of £10.2m or less
- £5.1m or less on its balance sheet
- 50 employees or fewer.
A company is a ‘micro-entity’ if, in a year, it satisfies any two of the following criteria:
- a turnover of £632,000 or less
- £316,000 or less on its balance sheet
- 10 employees or fewer.
Once the relevant provisions of the Act are in force, the filing obligations for small companies and micro-entities will no longer be set out in the same section of the CA 2006. Instead, they will be split into two sections, which aims to make the filing requirements clearer for companies to understand.
Micro-entities
Under the new rules, and from 1 April 2027, micro-entities will be required to file a balance sheet and a profit and loss account. They must also deliver a copy of the auditor’s report on those accounts unless the company is exempt from audit and the directors have taken advantage of that exemption.
Micro-entities will retain the option to not prepare a directors’ report.
Small companies
From 1 April 2027, small companies that do not meet the micro-entity threshold will be required to file a balance sheet, a profit and loss account, auditor’s report (unless exempt) and a directors’ report.
The effect of these provisions is to remove the option for companies to file abridged accounts or filleted accounts and will ensure that key information, such as turnover, is available on the public register.
Exemption from audit requirements
The Act introduces a new requirement into the CA 2006 for directors to make a statement when claiming an audit exemption.
From 1 April 2027, any company claiming an audit exemption will need to give an enhanced statement from their directors on the balance sheet. The statement must confirm the identity of the exemption being relied on and that the company qualifies for that exemption.
The requirement for companies to file an eligibility statement will provide the Registrar with additional evidence to take stronger enforcement action for false audit exemption filings in the future.
Filing accounts by software
The Act lays the foundation for Companies House to require all companies to file accounts in digital format. In accordance with these powers, Companies House has confirmed that all accounts filings made on or after 1 April 2027 (including dormant accounts) must be filed using commercial software. The Companies House web and paper routes will be closed for accounts filings but will remain open for other statutory filings.
Software-only filing supports the goal of a fully digital filing service and will help to prevent economic crime and bring the UK in line with international best practice.
Miscellaneous
The Government has confirmed that it is limiting the number of times a company can shorten its accounting reference period. From 1 April 2027, a company will have to provide a business reason if they want to shorten the accounting reference period more than once within 5 years.
The Act also gives the Secretary of State the power to make regulations enabling the registrar (on application) to:
- withhold from public inspection profit and loss accounts delivered to Companies House by micro-entities and small companies; and
- refrain from disclosing those accounts except in specified circumstances.
The regulations will contain details about who can make an application to the registrar and the grounds on which it can be made.
Resources
Also in this section
- Registered office address (in force from 4 March 2024)
- Registered email address (in force from 4 March 2024)
- The role and powers of the registrar (in force from 4 March 2024)
- Statement of lawful purposes and confirmation statements (in force 4 March 2024)
- Company and business names (in force from 4 March 2024)
- Companies House fees (in force from 1 May 2024) and new financial penalties (in force from 2 May 2024)
- Identity verification (to be implemented in phases, commencing 18 March 2025)
- Company registers and filings (coming into force from 18 November 2025)
- Directors’ disqualification (in force from 4 March 2024) and corporate directors (not yet in force)
- Protecting personal information on the register (implemented in phases, commencing 27 January 2025)
- Accounts and audit exemption (not yet in force – to be implemented from 1 April 2027)
- Implications for limited liability partnerships (to be implemented in phases, commencing 4 March 2024)
- Corporate criminal liability: new failure to prevent fraud offence (coming into force 1 September 2025)
- Registrar’s extended powers to strike off companies (all in force from 18 March 2025)