Yesterday afternoon I made the mistake of watching Kwan's Kwarteng, the Business Secretary, announce in the House of Commons what he claimed to be the biggest reform of the UK's Companies House in the last two centuries. It was a deeply disappointing experience.
Kwarteng claimed he was introducing emergency legislation today (Tuesday). But it turned out he was not. That was simply not true. We do not know when the legislation will be debated.
What we do know is that this so-called emergency legislation was in fact announced by David Cameron in 2016, and was available in draft by 2018. It is appalling that it is not on the statute book as yet.
Worse, what Kwarteng said was that he intended his moves should have no impact on existing UK users of Companies House, whilst across the House there was no appreciation that Companies House is not a regulator at all: it is merely a registrar of whatever nonsense is sent to it.
In that context, I thought it worth sharing the following which is adapted (i.e. with light editing) from Making Tax Work, which is the report I have written on tax transparency with Prof Andrew Baker for the Global Initiative for Financial Transparency. It summarises the most basic levels of disclosure that we need for businesses and companies in the UK. I have highlighted in bold these things that we do not have, to make clear just how lacking we are:
It is important that a government establishes and publishes the information noted below with regard to any business, however large or small, operating in a state so that those who engage with it can appreciate with whom they are trading, and so have and means of recourse against it.
First, a register of all businesses is required, including details of:
- The business name;
- The person or entity that owns the business;
- The place at which they may be contacted;
- Other contact details e.g. phone, email and website;
- The nature of the trade;
In addition, in the case of limited liability entities trading within a jurisdiction the following additional information is required:
- The name of the entity;
- Its registered number;
- The country of incorporation if not within the jurisdiction itself;
- Its registered office;
- Its place of business, if different;
- The identify of its directors or other senior management;
- The identities of all persons owning more than 5 percent of the entity;
- The identity of the person (whether human or legal) controlling the identity if such a person exists;
- The issued capital of the entity;
- The constitution of the entity;
- The accounts of the entity that give a true and fair view of its trading and financial position including:
- A narrative explanation of the trading activity undertaken during a period;
- An income statement or profit and loss account;
- A statement of affairs or balance sheet;
- A statement of cash flow or source and application of funds;
- Notes as necessary to provide sufficient information to understand these reports including tax due and paid;
- An explanation of the accounting framework used to prepare the accounts in question;
- Such additional information (not required for public record) as tax authorities require.
A threshold for registration, probably based in turnover, might be appropriate in the case of the self-employed.
It would seem that no such exemption should apply in the case of limited liability entities though. The creation of such entities is deliberate, and such is their significance in the economy of any jurisdiction that it is essential that their registration be required.
It is also essential that the other data noted to be required from limited liability entities be registered on public record. Limited liability creates the risk of moral hazard from the transfer of trading losses onto the creditors of companies and society at large. This risk has to be mitigated by the provision of data on the activities of companies.
That risk also needs to be mitigated by the imposition of an audit requirement on limited liability entities. Whether that be required for all entities or only for those above a chosen size is a matter for each jurisdiction to decide upon but the risk of fraud increases if any exemption is offered.
We have not had a register of all businesses in the UK since the 1980s. That is an omission that has to be corrected.
And we do not have sufficient accounting and ownership data for almost all limited companies right now.
This is the moment when we have to appreciate that unless we aim for the highest standards we provide loopholes for the crooks to get through.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
I was looking someone up and came across the ABN – Australian Business Number system.
Basically either need you need to be registered as a business, with a ABN, OR anyone you invoice has to deduct about 46% (Highest Income Tax Rate) from your invoice and forward it to the Tax Authorities.
Presumably the Tax Authorities can also cross check invoices against the tax return.
Why dont we do the same in the UK?
Excellent question….
I think you must have intended:
“whilst across the House there was no apparent that Companies House is not a regulator at all”
to read
“whilst across the House there was no appreciation that Companies House is not a regulator at all”
Edited – thanks
It has taken the Conservative MP Bob Seely, speaking under privilege to an empty House of Commons to speak the essential truth to power. His remarks on the oligarchs and their legal represntation pointed to the underlying major issue, for this Government, and pointed directly to the heart of a shocking state of affairs that has facilitated the oligrachs without the conservatives doing anything about it: even now. Seely directly challenged the government; how is it, that in supposedly “Free Country” oligarchs – (and I would add, others, provided they have the financial resources) – and their very effective lawyers are able so easily to intimdate our “Free Press” into silence, and prevent truth being spoken to power? There was no answer. The sparse Government benches looked around them with their usual ‘nuthin to do with me, guv’ expressions.
Seely represents the matter of “freedom” in a way that demonstrates that neoliberalism, and the Conservative Party certainly do not.
I would only add another observation about the shocking in which the corruption of the soul of our democracy has been so easily achieved by the neoliberal promoted corporatisation of our values. The use of Non Disclosure Agreements (NCOs), were orginally devised to prevent corportate predators from discovering how to undermine their prey for nothing, has actually been turned into a cheap mechanism for the rich (whether Oligarchs or anyone else with big money), to eliminate problems for their credibility at the cheapes price available. All thanks to neoliberal governments in Britain.
Richard
I feel this is huge and very important and could just be one of your ideas that eventually gets accepted and implemented (like CBCR).
I would add that similar to public CBCR requirement the above data should include no of employees and all of the data must also be available on the companies’/entities website and remain accessible for 5 years.
Any entities that fails to supply the info on or before the statutory due date will be treated as non-compliant entities which will be specifically highlighted on the Companies House website.
A separate Co House webpage/register should be set up which lists all of the non-compliant entities and provides their relevant details. This way they can be identified very easily.
Any transactions with non-compliant entities will automatically be subject to UK withholding tax at 35% and the counter party must notify and pay over the tax to HMRC within 30 days (of payment – which can be very broadly defined).
Sounds familiar? Well we already have FATCA which has been in place for many years now. This could be very similar.
Any thoughts?
I think there is some merit to the withholding requirement except for the fact that this could result in penalties for those who do not comply and I see risk in that
But the option to impose when the abuse is deliberate would be possible
It’s no coincidence that proper control and regulation of business registration ceased in the 1980s: the whole economy suffered the same fate when the Thatcher government went full-throttle on neo-liberal ideology and abandoned sensible checks and balances across the board. The results are easy to spot: the Great Financial Crash of 2007/8, the Golden Visa/Tory funding scandals, the loosening of standards in auditing, the rampant greed in pursuit of ever-increasing profits and the resultant global environmental damage, the growth in tax havens and tax evasion, the loosening of standards in governance, the absence of adequate internet controls (e.g. external and Cambridge Analytica’s interference in elections/referenda), Brexit, privatisation of natural monopolies, austerity with its crippling impact on the NHS, the justice system, local authorities etc – the list goes on and on. Thatcher was (and still is) reviled in Scotland for the damage she inflicted on its economy, but the opposite seems to have happened in England where the electorate seems ever keen to be governed by the Tories in spite of these obvious failings and the glaring lack of talent in the party.
But it’s not just the UK: the insidious spread of neo-liberal Mammon-worship has been global. The world badly needs fixing and credible leadership by socialists may be the solution – it was, after all, socialism which put Western Europe back on its feet after WW2. USA may have provided financial support, but the rebuilding of Western Europe was achieved by the governance and ethics of socialism. Perhaps the war in Ukraine will provide the impetus for a resurgence of socialism just as happened in 1946?
Thanks
The amusing thing about the two lists is that – many UK banks already insist on this level of detail (certainly in the case of small companies – doubtless it’s all different for oligarchs) – so it’s not as if most/all the info does not already exist. Indeed it would be fairly trivial to centalise it (database mergers) and end up with a pretty good view of who and what. The banks justufy this level of data based on “we must know our customers” – which is certainly applied in the case of the small fry. I guess with respect to the pike & sharks different “rules” apply (come in here dear boy, have a cigar, you’re gonna go far – etc).
As a firm we used to keep this stuff twenty years ago
There is a weasel tendency by apologists for Britain being a supposed ‘leader’ in world Sanctions too boldly claiming “we are all working together”;’ meaning the harmony of US, EU, Britain, Japan, Switzerland, Canada etc. working in unison. But this is too vague and imprecise; none of these other countries are involved in fixing the complex web of obscurity that buries the transparency of doestic British company or property ownership regulations and laws under layers of mystery, fog, shell companies, information-light offshore accounts, SLPs, and a general impermeable barrier of obscurity and complexity. There is only one culprit here – britain and successive governments; especially Conservative Governments. They are in the spotlight now. Johnson can bluster best in the house of commons, but his paltriness, his febbleness was exposed by a single Ukrainian woman in a Press conference in Warsaw yesterday, Daria Kaleniuk: search for her questioning of our PM online here: https://www.theguardian.com/politics/2022/mar/01/ukrainian-activist-berates-boris-johnson-over-russia-response. What a pathetic apology for leadership he demonstrates, when actually required to demonstrate – leadership.
Suddenly the British government is protesting we are just one country among many (so not ‘Global Britain’ then?); but it isn’t true. We are a – in some ways ‘the’ – leading international, world financial trading centre, and a leading currency, peculiarly open to easy, hidden financial transactions. There is our problem, and there is no escaping our culpability. Britain, Johnson’s Government, and every Conservative Government for decades has claimed its leadership in openness as a world financial centre for a very long time. That had a cost – and Britain was warned, time and again, what was that cost: integrity, and the West’s and the British people’s best interests. But the Conservative Party knew best, take the money – it doesn’t smell; only it didn’t take the warnings and it failed – the British people, Europe, Ukraine and the world. no excuses – and no escape from responsibility: catastrophically.
The richly desrved sobriquet ‘the Londongrad Laundromat’ is richly deserved. Johnson was still failing in Parliament today; under the gaze of the Ukrainian ambassador. What an embarrassment for a PM: a political pygmy who has failed; and keeps failing, not where Britain cannot act (like a no-fly zone) ; but where it can, and continues to prevaricate – pursuing the oligarchs and their families to the bitter end, and more than that; against the veil of secrecy over financial transactions in Britain that are too easily used for inappropriate purposes by malign influences, far beyond Russian oligarchs alone. We have put up with all this appalling behaviour for too long.
I hope people have seen the list of Tory MPs and the donations from Russia linked sources that they have accepted. If your MP is one of them, write to them and maybe to your local newspaper as well. I find that my MP Jeremy Hunt has received substantial amounts and have done just that. The response should be interesting.
Im not expecting a Christmas card this year after recent correspondence, though at least I do get a reply
Damien Hinds MP, Security and Borders Minister has just provided a completely absurd interview on BBC Radio Scotland GMS. Asked about the Russian money accepted by the Conservative Party he said it was all open and properly accounted. Asked then if he knew where the money had originated, he compleltely changed tack, explaining what the Conservatives are now going to do to tighten rules. A lesson on how to fill interview time without explaining anything about what the Conservatives have done, or are going to do with the money they were given.
Hinds was no better on Ukrainian refugees coming to the UK. He tried waving the red herring of with a rambling diversion into Schengen, but the interviewer wasn’t conned. So he then claimed all we had to do was conduct a few simple checks to ensure Russians were inserting themselves under a false flag. Good luck with that in the middle of a crisis and a war in Europe. It fell apart fast enough when the interviewer provided an example from an actual case. Then the Minister couldn’t provide an answer on the radio. So, good luck to the poor Immigration official on the frontline at the border producing answers, who can’t body-swerve an interview – and has the bully Priti Patel for a boss.
There is an easy fix for all this. Sack Priti Patel. Then sack Johnson.
“Russians were not inserting themselves under a false flag”
It is in the same category as the accusations Trump levelled at Mexicans coming across the border, that they were all murderers and rapists.
Borderline racist – well maybe not borderline. No more than we have come to expect from Patel and her mouthpieces.
Ever more apparent that the EU is leading in responding to Russia’s bloody invasion, with the UK dragging its feet, whether its on accepting refugees or clamping down on oligarch assets. They and the US are well aware of what is holding back the compromised UK government.