As AccountingWEB (of which I was for a decade at the start of the century a contributing editor) noted yesterday:
The expected timeline for small companies and micro entities to file their profit and loss (P&L) accounts with Companies House has been paused following stakeholder concerns, Companies House has confirmed.
The news was revealed today in an update to the “Filing your Companies House accounts” guidance on gov.uk.
The update read: “Changes to accounts filing will not be introduced in April 2027. The reforms are still under review and a final decision will be announced shortly. Companies will receive at least 21 months' notice to prepare.”
Companies House did not issue a statement, but said the accounts reforms are under review following stakeholder concerns about the need to “strike the right balance between tackling economic crime and avoiding undue burden on business”. They confirmed that a final decision on the reforms will be announced shortly.
Companies will now receive at least 21 months' notice to prepare for the implementation of any proposals. This means that companies will be given a new date for any new proposals, and this will no longer be April 2027.
This is utter drivel, issued by a Labour government that has clearly forgotten every reason why it is in government, and everything that government is for.
Limited liability is not a right. It is a privilege granted by society from which society must secure a benefit. The gain is a supposed increase in economic activity from which all might prosper. The reason for the gain is that those with limited liability might take risks that they could not otherwise afford to undertake, with the resulting upside potential justifying the cost. And who bears the downside risk? The creditors of the company do.
Who are those creditors? Start with this list:
- Trade creditors owed money for goods and services they have supplied in good faith.
- Customers who lose guarantees and support.
- Employees
- Tax authorities
- Unsecured lenders, such as banks and providers of other credit.
Who seems to have the biggest risk? Evidence from liquidation data and HMRC's tax gap data suggests it is our tax authority. 40% of all corporation tax owed by small companies is now unpaid. The cost is at least £14.7 billion a year. The loss of other unpaid taxes will considerably increase this. To suggest in that case that the risk arising from the grant of limited liability is decidedly asymmetric and very high is to be generous. The reality is we are all being taken for a ride by small businesses, and any sane government would crack down on this.
The price of this risk was always meant to be corporate disclosure by a limited company of its audited accounts to demonstrate three things:
- The scale or its activities.
- The reliability of its management.
- The risk created by engaging with it.
The aim was quite explicitly to mitigate the risk to society.
But the audit requirement went in the 90s.
Then the requirements for filing data almost entirely collapsed until, by early this century, most small company accounts on public record became virtually meaningless, with no trading information, no description of its activities, and a balance sheet so denuded of data that establishing any real idea of risk was almost impossible. And this assumed the accounts were filed in the first place: hundreds of thousands of sets a year are not.
And the absurd thing was that full accounts for companies are still required: HMRC and shareholders must have them. It actually imposes a cost to remove the data from the accounts produced for shareholder purposes to file reduced information with Companies House, so there is no burden on businesses by requiring full filing of information; there is an increased cost from reducing the amount of data put on public record.
But the fools (there is no other word for it) in Labour have fallen for the pleading that putting data on the trading of companies on public record will harm business, when, as economic theory knows, having data is key to the operation of efficient markets and to mitigating risk. The only people who gain from this decision by some stupid minister or other are the cheats, the crooks, and the conpeople. That's it. And Labour is facilitating that abuse now. It was a Tory plan to increase transparency by putting profit-and-loss accounts back on public record, and now Labour has abandoned it.
To call Labour charlatans and facilitators of crime is to be too kind to them. They can instead only be described as utterly stupid. And we are all going to pay the price for that.
The job of a government includes:
- Protecting its citizens from harm, including by mitigating risk
- Tackling crime
- Collecting tax revenue to stabilise the economy
- Enforcing the law
This move makes all of these harder.
Why, then, is Labour in power, and what does it think it is for? I wish I knew the answer to that.
And when tackling this issue could help reduce inequality, restore competitive markets that are currently undermined by cheats, and reduce the inequality that tax cheating also creates, I am even more baffled by them. It is time to consign them to history: they know not what they are for.
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I’m not arguing with the thrust of this blog (& I speak as a director of a UK company).
There is another problem and it relates to the gov’ service “One Login” (and in turn the ability of companies to file accounts). This is used to prove identiies which Companies House requires for directors etc. Nothing wrong with that. Try using One Login” – does not work if you are outside the UK (specifically the service appears unable to send an SMS to a non-UK number), and it appears impossible to cancel an ID (& start again). The problem is that to file accounts, the ID of the directors has to be confirmed first. Other amusing fact: One-Login is classed as being in “BETA” – i.e. some bunch of geniuses have launched a faulty service, which one needs to use, if company accounts are to be filed. Reddit is filled with complaints. Others who I know say that they got it to work, eventually, but have no idea why it did. The situation is now so bad that questions are being asked in places such as the House of Lords.
If there was an Olympics covering failure, the UK would win gold medals in every class. In the case of One-Login, who designed it? how much did it cost? how much function creep was there? and why was it launched before proper testing? I am confident that the imbeciles in gov have no answers.
The system is absurdly clunky
I approve the idea, of course.
The delivery was clealrly kncocked up in 30 minutes at massive cost.
Looks like it was summat that the Palatir wazzocks cooked up. They had £1.2bn for “back office software” (source Caroe Cadwallader). Given it is truly shit then this is likely. Natch it collects things such as facial photos.
Similar experience for me. No problem being ID’ed or providing accounts….. but it is not made easy by the poor technology.
Also, I don’t like being steered towards tax software I don’t understand. Currently, you can just enter numbers in boxes on their system but this will stop shortly, I believe.
In their favour, a phone call (to sort out ID tech issues) got me through to a very helpful human.
As you say, small businesses need accounts for tax and other purposes anyway so there is no additional burden in requiring those accounts to be filed at Companies House.
Perhaps it might make sense for Companies House to be merged with HMRC because the tax authority has a real interest in knowing who the shareholders and directors are, what the share capital is, what the profit and loss account and balance sheet look like.
The relaxation of regulations on companies – the so called cutting of “red tape”, with an aim of cutting costs to business – has simply allowed the unscrupulous to prosper at the cost of everyone else. The information available to the public is often atrociously bad and sometimes entirely absent.
I entirely agree: and give HMRC very strong powers to police the system.
The role of Companies House is, in istelf, now defunct. Merging with HMRC would make sense.
When we had the builders in they wanted payment by BACS
From what they said and looking at their invoices they were using some form of accounting software that did the work for them and included I assume some sort of audit trail with it.
So you will know the answer am I right and of so most ‘small business’ accounts should be audited by the software already?
In which case filing accounts should be very straightforward.
Preparing accounts is a very, very long way different from book keeping.
As different as maths is from arithmetic.
Meanwhile, the burden on sole traders in time, effort and financial cost is increased as more are forced to submit digital quarterly returns. It’s also very stressful for many as there is so little real help and support available for anything tax related.
(From my desk I can see the empty and derelict local tax office where not so long ago you could go in and speak to someone if you were having problems with your tax return).
I agree with you entirely.
MTD is a massive burden on small business.
Hell’s teeth. Terrible. No redress for trade creditors or customers. Dismal for the small businesses that run within the law. If the Tories saw this needed fixing, it must be bad….
Talking of Labour could I refer people to George Monbiot’s recent Guardian article,also available on his Bluesky site, titled ‘The UK government didn’t want you to see this report on ecosystem collapse; I’m not surprised!
Speaks for itself and as he says the info needs spreading.
Thanks
Mark
I have done my bit: I reported it on this blog
Not just the cheats, crooks and conpeople. I suspect there are quite a few politicians that use single member/director companies for their outside interests and having to publish a P&L would make it clear to everyone how much they are making. I also suspect the venn diagram between “cheats, crooks and conpeople” and politicians has quite a big overlap.
There are too few politicians for that to be true.