Changes to small companies and micro-entities

In October 2023, the Economic Crime and Corporate Transparency Act was passed by Parliament, with an emphasis on tackling economic crime and improving public access to financial information.

With the aim of increasing transparency, Companies House will be introducing significant changes to small and micro companies.

Small and micro companies will soon need to file profit and loss accounts so that their turnover is available to view on the public register, with small companies being required to also file a director’s report.

The Government explained, “The lack of detail in small and micro-accounts has made it impossible to confirm eligibility to file under a specific regime and claim audit exemptions. It has also made it difficult for lenders and creditors to determine the creditworthiness of small businesses. This can deter them from offering finance which hinders small business growth”

Abridged Accounts

Small companies will no longer be able to file abridged accounts (a simplified version of a company’s annual accounts)

When do the changes come into effect?

Currently, there is no set timeline but Companies House have stated that they will confirm when the changes will be implemented, giving fair notice.

What classes as a small company?

If any 2 of the following apply:

Turnover of £10.2m or less
£5.1 million or less on its balance sheet
Having 50 employees or less

What classes as a micro-entity?

If any 2 of the following apply:

Turnover of £632,000 or less
£316,000 or less on its balance sheet
Having 10 employees or less

Other changes

Accounts to be filed digitally with the removal of a paper filing option for most companies
For an audit exemption, a company will have to meet qualifying criteria and provide proof of this in a statement from the directors on the balance sheet. This includes dormant companies
Limiting the amount of times a company can reduce its Annual Reporting Period
Requiring documents to be delivered together, in cases where more than one document is filed, including for the filing of accounts

Changes to Small Companies and Micro-entities