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The Economic Crime and Corporate Transparency Bill is making its way through Parliament and is currently in the final stages with amendments being considered.

As well as giving Companies House greater powers in tackling economic crime and providing more transparency for entities registered at Companies House, the Bill proposes changes to the accounts that small and micro-entities are able to file.

Currently, small and micro entities are able to file ‘filleted’ accounts at Companies House, which are essentially their full set of accounts without a directors’ report and profit and loss account.

The Bill, as part of giving greater transparency, proposes to remove the option to file ‘filleted’ accounts for these entities.

The thresholds used to determine whether an entity is small or micro are:

Small companies will then be required to file both their profit and loss account and directors’ report, whilst micro entities will file their profit and loss account although continue to be able to have the option of not preparing or filing a directors’ report. 

So called abridged accounts, which contain a simpler profit and loss account and balance sheet will also not be an option for small companies to prepare and file.

As you can see, the theme is clearly on transparency and providing more available information for all to see at Companies House.

Directors should be fully aware of these changes, as the implication of not being able to file ‘filleted’ or abridged accounts is clear. More sensitive disclosures including directors’ remuneration and tax disclosures will be brought into the public eye.

At the end of March 2023, there were 4.9 million private limited companies on the Register at Companies House (92.7% of all registered corporate bodies). A significant proportion of these are small and micro-entities, so the scale of additional disclosures on public record should not be underestimated.

Possible future changes for small companies

In October 2022, the Government changed the definition of a small company by increasing the employee number threshold from 50 to 500. This departs from the threshold imposed by the EU.

The intention is that this revised threshold will be used in determining exemptions available to small companies in the future when such things as small company limits (as set out above) are reviewed.

It is possible that when the small company thresholds are reviewed, assuming these are increased upwards which the change in October 2022 gives a strong indication could happen, that a significant number of additional companies could qualify as small and also be able to take advantage of audit exemption.

Audit exemption is typically measured using the small companies thresholds outlined above, and the UK had always set these levels at the maximum available levels under the EU, unlike other EU member states. So, it would not be unreasonable to think that there may be upwards revisions to the thresholds going forward.

Audit and Assurance Partner, Julian Gaskell said: “Audit exemption was first introduced back in 1994 and has seen gradual increases in the size thresholds over the years. Back in 1994 the turnover threshold was £90,000 and I can still remember the huge sigh of relief from the audit team as they would no longer have to audit the BBC camera man with a turnover of £30,000!

“Nothing stays the same forever!”