Visit google

Google Reviews

reviews

Reducing the Tax Gap: Tips for Small Businesses

The tax gap – the difference between taxes owed and taxes collected – was a staggering £39.8 billion for the 2022-2023 tax year, with 4.8% of taxes uncollected. 

Small businesses account for about 60% of this gap. But don’t worry; there are strategies to reduce your impact and remain compliant with tax regulations. Here’s a look at where small businesses often slip up and how to improve tax compliance.

Common hurdles for small businesses

1. Incorrect VAT returns

VAT can be tricky, with many rules and potential pitfalls. Common mistakes include:

  • Miscalculating VAT: Errors in VAT calculations can lead to incorrect returns.
  • Incorrect claims: Claiming VAT on ineligible items can result in penalties.
  • Incorrect filings: Even something as simple as putting the numbers in the wrong box can trigger an HMRC Compliance Check.
  • Missing deadlines: Late VAT returns can incur fines and interest.

To avoid these issues, keep your VAT records accurate and current and regularly review your VAT return preparation process.

2. Not reporting offshore income

If your business earns money from abroad, it’s important to report it correctly. Issues often arise from:

  • Not reporting offshore income: Whether accidental or due to misunderstanding reporting requirements.
  • Lack of awareness: Many small business owners may not realise offshore income needs to be reported.

Keep detailed records of international transactions and consult a tax advisor with expertise in international tax laws to ensure accurate reporting and avoid fines.

3. Payroll reporting mistakes

Payroll mistakes can be costly and include:

  • Misreporting wages or bonuses: Affects National Insurance contributions and income tax.
  • Errors in employee data: Incorrect personal or payment details.
  • Non-compliance with updates: Failing to apply changes in payroll laws or rates.
  • Failure to declare company benefits: Many businesses get caught out as they may not realise they are providing their employees with a taxable benefit and need to declare it.

To avoid these issues, use reliable payroll accountants or software and regularly check payroll reports for accuracy. Stay informed about the latest tax rules affecting payroll.

How to improve your tax compliance

1. Keep your team updated

To boost tax compliance, keep your accounting team updated:

  • Training: Regularly invest in HMRC webinars, workshops, or online courses.
  • Subscriptions: Subscribe to tax update newsletters for the latest info.
  • Internal communication: Foster open discussions about tax law changes and their impact.
  • News: Keeping an eye on the news will help you stay up to date with the most recent and upcoming changes to legislation.

Regular updates will help your team stay compliant and avoid costly errors.

2. Perform regular internal audits

Internal audits are a proactive way to catch and correct errors before they lead to bigger problems. Regular audits can help you:

  • Identify mistakes: Spot errors in financial records, VAT returns, or payroll reports.
  • Maintain compliance: Verify that all tax obligations are met and records are accurate.
  • Improve processes: Discover inefficiencies or areas for improvement in your financial processes.
  • Discovery of internal fraud: An internal audit can reveal if there have been any internal wrongdoings.

Schedule internal audits periodically and consider bringing in an external auditor for an objective review.

3. Understand and apply for available reliefs

Tax reliefs and exemptions can lower your tax bill. Key updates include;

  • National Insurance: Reduced rates for Class 1 and Class 4, with Class 2 removed for the self-employed.
  • Tax relief schemes: Support for research and development tax reliefs and embedded capital allowances on commercial property.

Consult a tax advisor to identify and apply the relevant reliefs and exemptions for your business.

4. Report accurately and on time

Timely and accurate reporting is important to avoid fines. Key deadlines for this year included:

  • P60s: Due by the 31st of May 2024.
  • End of Year Reporting: Final FPS/EPS submissions needed a final submission indicator, with EPS due by the 19th of April 2024 if no further payments were made.
  • P11D Submission: The deadline was the 6th of July 2024, with no paper forms accepted.

Make sure all reports are accurate and submitted on time to avoid penalties. Stay on top of future deadlines to keep everything running smoothly.

5. Get professional help

Sometimes, the best way to stay compliant and address complex tax issues is to consult professionals. A tax advisor or accountant can:

  • Provide expertise: Offer specialised knowledge of tax regulations and compliance.
  • Identify risks: Help identify potential areas of non-compliance before they become issues.
  • Help with planning: Offer advice on tax planning and strategies to minimise your tax liability.

Regular consultations with a tax professional can provide peace of mind and help you navigate the complexities of tax compliance.

Contributing to a fair tax system

Reducing the tax gap isn’t just about avoiding penalties; it’s about supporting a fair tax system. By tackling common compliance issues and following these tips – training your team, conducting regular audits, applying for reliefs, reporting accurately and on time, and consulting professionals – you can improve your tax accuracy and make sure your business contributes fairly.

Get in touch with our team for accountancy and payroll guidance.

Related news and events

Business Tax & Compliance
Business Tax & Compliance

10 July 2024

How to Work Out Your Transitional Profit if You’re Self-Employed

Business Tax & Compliance

18 March 2024

Merging R&D Schemes: What Changes in 2024

Business Tax & Compliance

27 February 2024

Exploring Tax Reliefs and Allowances for Businesses and the Self-Employed

Visit google

Google Reviews

reviews

Streamlining Client Onboarding with Advanced AML Security Checks

In today’s business world, Anti-Money Laundering (AML) security checks are essential for financial sector businesses. These checks not only protect companies from fraud and illegal activities but also keep them compliant with the law. At Norwich Accountancy, we take this responsibility seriously and have recently improved our AML and ID verification processes to simplify and secure client onboarding, making the experience more efficient and reassuring.

What are AML security checks?

AML security checks are procedures used to prevent, detect, and report money laundering activities. They involve verifying clients’ identities, monitoring transactions, and ensuring all activities comply with legal standards. These checks are important for keeping the financial system honest and preventing money from being used for illegal activities like funding terrorism or drug trafficking.

Why are AML security checks important?

The main purpose of AML security checks is to protect businesses from being used as channels for money laundering. This protection maintains the trust and stability of the financial sector. Also, compliance with AML regulations is mandatory for companies that want to operate legally and avoid hefty fines and legal repercussions. By carrying out thorough AML checks, businesses can also improve their reputation and build trust with clients and partners.

Introducing Red Flag Alert

To streamline our AML security checks, we’ve partnered with Red Flag Alert, a leading provider of advanced AML solutions. Red Flag Alert’s cutting-edge technology allows us to perform thorough checks quickly and efficiently, reducing the burden on our staff and minimising the impact on our clients. This partnership enables us to maintain a proactive stance against financial crime while making sure our onboarding process stays smooth and responsive to our clients’ needs.

How Red Flag Alert Works

Red Flag Alert’s AML security checks are fully digital and user-friendly. When a new client begins the onboarding process they’ll receive a verification SMS asking them to verify their identity via their smartphone. This process involves three simple steps:

  1. ID document capture: The client is asked to take a picture of a valid government-issued ID document. The system ensures the document is clearly visible and free from glare or blurring.
  2. Selfie video: Next, the client takes a short selfie video using their smartphone camera. This biometric likeness check confirms the person presenting the ID is the actual owner of the document.
  3. Submission and verification: The client submits the photos, and Red Flag Alert’s AI-driven system performs an in-depth analysis, cross-referencing multiple databases to verify the information.

This whole process takes no more than 90 seconds, providing a swift and hassle-free experience. Also, Red Flag Alert’s technology includes advanced features such as multi-bureau analysis and a biometric liveness check, which enhance the accuracy and reliability of the AML checks.

Benefits of Red Flag Alert security checks

By implementing Red Flag Alert’s AML security checks, we offer several key benefits to our clients:

  • Speed and efficiency: Traditional AML checks can be time-consuming, often taking days to complete. Red Flag Alert reduces this time to just minutes, allowing us to onboard clients faster and without unnecessary delays.
  • Compliance assurance: Red Flag Alert’s technology ensures our AML processes are always up-to-date with the latest regulations, reducing the risk of non-compliance.
  • Enhanced accuracy: The AI-driven system provides a high match rate, reducing the need for manual intervention and reducing errors.
  • Improved client experience: The fully digital process is convenient and easy to use, providing a seamless onboarding experience for our clients.

Staying compliant with changing regulations

The regulatory landscape is constantly evolving, with new rules and requirements introduced regularly. The UK government is particularly focused on cracking down on economic crime, corruption, and data security. As a responsible company, we’re committed to staying ahead of these changes and ensuring our AML processes are always compliant.

Ensuring AML efficiency with Red Flag Alert

AML security checks are a key part of the financial sector’s compliance framework. By partnering with Red Flag Alert, we’ve enhanced our AML processes, making them more efficient, accurate, and user-friendly. This partnership not only helps us comply with regulatory requirements but also means that our clients enjoy a smooth and secure onboarding experience. By using advanced technology and staying compliant, we can protect our business and clients from the risks associated with money laundering and other illegal activities. As regulations continue to evolve, we’re focused on keeping our operations secure and following the highest standards of compliance.

Get in touch today

At Norwich Accountancy, we understand the importance of AML security checks and are proud to offer our clients the most advanced solutions. For more information on our AML processes or to discuss any concerns, please don’t hesitate to get in touch with our team.

Related news and events

Accounting
Accounting

17 April 2024

What you need to know about the Spring Budget 2024

Accounting

5 March 2024

Springing into Energy Savings: A Dive into the Latest Trends

Accounting

10 July 2023

Class 2 National Insurance Contributions: What You Need to Know

Visit google

Google Reviews

reviews

Keeping Payroll on Track Through Business Mergers and Changes

Managing payroll during business changes like mergers or successions is important to make sure you’re following HM Revenue & Customs (HMRC) rules. Here’s a detailed guide on what businesses should think about and how to manage these transitions smoothly. It covers updating employee records, handling taxes, and meeting legal requirements to protect both employers and employees. By following these steps, businesses can manage payroll effectively during these changes, keeping things running smoothly and making sure they stay on the right side of HMRC. This proactive approach not only helps with a seamless transition but also strengthens the business to adapt better to new situations.

Understanding mergers and successions

Before addressing payroll changes during mergers or successions, it’s important to grasp their impact on operations. Here’s how these transitions influence payroll management and what businesses should consider for smooth navigation:

Mergers: When businesses merge, they typically combine their payroll systems, sometimes using a new employer reference number. This helps simplify things and makes sure they follow HMRC rules. They might also need to merge employee records and payroll systems to fit the new setup.

Successions: In a succession, when a business changes hands through a sale or insolvency, the new owner takes over payroll duties. They’ll likely get a new employer reference number. This switch involves transferring employee records and payroll responsibilities to make sure everyone gets paid correctly and meets legal requirements. They might also tweak how they handle payroll to match how the new owner wants things done, keeping everything stable and compliant during the transition.

First steps to take

If your business is going through a merger or succession, make sure to reach out to the HMRC employer helpline straight away. They can help work out if it’s a merger or succession and give advice on which employer reference to use. If you need a new reference, HMRC will sort that out for you.

Moving employees to new payrolls

Before deciding whether to use the same employer reference or a different one during a business transition, it’s important to understand how each option affects payroll operations and compliance. Here’s how you can manage these changes effectively:

Same employer reference:

  • If moving employees to a new payroll but retaining the same employer reference, continue operating PAYE as usual under that reference.

Different employer reference:

  • Transfer payroll records to the new employer reference.
  • Submit a Full Payment Submission (FPS) under the old employer reference, including year-to-date pay and tax figures.
  • Provide affected employees with details of their pay and deductions up to the transfer date.
  • Submit an FPS under the new employer reference, making sure to restart year-to-date figures from zero and include full starting details for each employee.

Managing payroll obligations

When moving employees to a new payroll under a different employer reference, it’s important to handle PAYE tax and National Insurance Credits accurately. If you’re using cumulative tax codes, continue using the pay and tax details linked to the old employer reference until the transition is finalised. This consistency means that payroll calculations stay accurate and compliant with HMRC regulations throughout the transition. It’s essential for maintaining accurate records of employees’ tax deductions and National Insurance contributions. Managing these aspects carefully helps businesses smoothly switch to new payroll systems without disrupting employee payments or tax reporting.

Submitting P11D forms

P11D forms must be submitted depending on the type of change your business has experienced:

Merger of PAYE schemes:

  • Submit two P11D forms per employee receiving company benefits:
    • One under the original PAYE reference covering up to the merger date.
    • One under the new PAYE reference covering from the merger date.

Succession:

  • If HMRC has been notified about the succession, submit one P11D form per employee under the new PAYE reference, containing information for both old and new references.
  • If HMRC hasn’t been notified, submit two P11D forms per employee:
    • One under the old PAYE reference up to the succession date.
    • One under the new PAYE reference from the succession date.

Part scheme transfer:

  • Submit two P11D forms per employee:
    • One under the old PAYE reference covering up to the transfer date.
    • One under the new PAYE reference covering from the transfer date.

Compliance and reporting

Making sure you submit FPS and P11D forms on time and with accurate information is important to meet HMRC’s rules. Stick to the deadlines and give detailed information to avoid any fines or hold-ups in processing.

Navigating payroll changes in business transitions

Handling payroll adjustments during business mergers or changes involves careful planning and following HMRC guidelines. Understanding the differences between mergers and successions, transferring employees between payrolls correctly, and fulfilling P11D obligations are key steps. This makes sure payroll operations continue smoothly and comply with tax regulations. 

By following these steps, businesses can handle payroll responsibilities effectively during mergers, successions, or other significant changes, maintaining both regulatory compliance and smooth operations.

Need some help?

Connect with our experts for personalised advice. Call us today on 01603 630882 or fill out our contact form to get tailored support for your payroll transitions.

Related news and events

Payroll
Payroll

3 April 2024

How the 2024 Paternity Leave and Pay Amendments Benefit UK Families and Employers

Payroll

19 February 2024

Salary Sacrifice Arrangements for Employers Explained

Payroll

2 February 2024

Navigating HMRC’s Latest Off-Payroll (IR35) Compliance Guidelines

Visit google

Google Reviews

reviews

Navigating HMRC’s Latest Off-Payroll (IR35) Compliance Guidelines

If you find dealing with tax laws overwhelming, especially with all the changes happening, you’re not alone. Therefore, we’re committed to making tax matters more manageable for you. The introduction and reform of the off-payroll working rules, commonly known as IR35, have added a layer of challenges to the mix. Luckily, HMRC’s Guidelines for Compliance (GfC) aim to help you understand and implement these rules. To help you, this blog explores the essentials of these guidelines. We’ll also share some insights to ensure your business remains compliant while keeping things running smoothly.

Understanding the Scope and Purpose of IR35

IR35 can sound like a mouthful, but it’s all about ensuring workers who provide their services through intermediaries like personal service companies or partnerships pay the correct taxes and National Insurance contributions. These rules mainly affect medium and large-sized clients in the private and public sectors.

Who Should Be Concerned?

If you’re a client or employer operating these off-payroll working rules, or you hire workers through personal service companies, limited companies, or partnerships, this concerns you. It’s also relevant for agencies in the supply chain and professional bodies advising clients on these rules.

Why Comply?

Compliance is more than just following the rules. It’s about understanding the legislation to make sure your business stays on the right side of the law and runs efficiently and ethically.

Three Key Components of the Guidelines

  1. Preparing and Making Status Determinations: One of the big things with IR35 is correctly identifying and classifying workers. The guidelines stress the importance of preparing for and making accurate status determinations for off-payroll workers. This means figuring out if a worker should be considered employed or self-employed for tax purposes, based on their situation.
  1. Collaboration in the Supply Chain: Working together is important for compliance. All entities in the supply chain need to share information and understand their responsibilities, especially when it comes to identifying workers covered by the off-payroll working rules.
  1. Systems and Processes for Compliance: The guidelines offer examples of systems and processes that can help you avoid errors when determining a worker’s status. This includes understanding different scenarios and organisational structures that may fall under IR35.

Practical Steps for Compliance

  • Use these guidelines alongside existing off-payroll working guidance to get the full picture.
  • Tailor your approach to your organisation’s unique situation and scale in off-payroll working engagements.
  • By following these guidelines diligently, your organisation can significantly reduce the risk of errors and, consequently, the likelihood of incurring penalties.

Understanding Your Responsibilities

  • For Medium and Large-Sized Clients: If you’re in this category, you’re responsible for determining the employment status for tax purposes of workers who provide services through intermediaries.
  • Issuing Status Determination Statements: When a worker falls under the IR35 rules, you must clearly communicate this decision via a status determination statement, giving clear reasons for your determination.
  • Handling Taxes and Contributions: If a worker is considered employed for tax purposes under IR35, you’ll need to handle the deduction of Income Tax and employee National Insurance contributions. Also, you’ll have to pay employer National Insurance contributions and, if applicable, the Apprenticeship Levy.

New Policy Change: Opportunity to Pause Settlement

There’s some good news, as, from the 6th of April, 2024, HMRC will let organisations with open compliance checks under IR35 offset taxes already paid by workers or intermediaries against what’s owed. This applies to Income Tax and National Insurance contributions assessed since the 6th of April, 2017, for off-payroll working errors.

Implications for Your Organisation

You can consider pausing the settlement of your open compliance check until after the 6th of April, 2024, under specific conditions. This includes acknowledging an error and agreeing on the gross liability. Providing HMRC with the necessary information is important.

Proceeding with Compliance Checks

HMRC will keep doing compliance checks as usual, but you can opt to pause the settlement. However, it’s advisable to make a payment on account to avoid accruing statutory interest.

Achieving Ethical Compliance with HMRC’s Off-Payroll Rules

Navigating HMRC’s off-payroll working rules might seem daunting, but it’s all about understanding the law, having a solid plan, and doing business responsibly. By following these guidelines, your organisation not only complies with the law but also sets an example of ethical business conduct. Remember, compliance isn’t just a legal obligation; it’s a mark of a forward-thinking and responsible business.

Seek Guidance 

If you’re ready to take the first step toward seamless compliance and ethical business practices, embrace HMRC’s off-payroll working rules today. Still have questions? Reach out to us on 01603 630882 for help or advice. 

Related news and events

Payroll
Payroll

3 April 2024

How the 2024 Paternity Leave and Pay Amendments Benefit UK Families and Employers

Payroll

19 February 2024

Salary Sacrifice Arrangements for Employers Explained

Payroll

18 January 2024

Understanding The Latest National Insurance Contributions (NICs) Rate Cuts

Visit google

Google Reviews

reviews

Guidance on Claiming Research and Development (R&D) Tax Reliefs

The UK Government, with its strong inclination towards fostering innovation, offers lucrative tax incentives to businesses that engage in research and development (R&D) projects in science and technology. For businesses not already capitalising on these reliefs, understanding them can unlock significant savings, improving cash flow and encouraging further investment in innovation.

In this guide, we’ll demystify the process and provide a broad overview of the R&D tax relief scheme, helping you determine if your business is eligible and understand the claiming process.

What are R&D Tax Reliefs?

At its core, R&D tax reliefs allow companies to reduce their Corporation Tax or claim cash credits based on their R&D expenses. The UK provides two main R&D reliefs:

  • SME R&D Relief: 

Suitable for small and medium-sized enterprises (SMEs) with <500 staff, <100 million euros turnover, or <86 million euros balance sheet. For year ends starting on or after the 1st of April 2023, businesses can deduct an extra 86% of their qualifying costs from their yearly profit, alongside the standard 100% deduction, totalling a 186% deduction. Loss-making firms can also get a tax credit of up to 10% of the loss. 

  • RDEC (Research and Development Expenditure Credit): 

For larger companies and SMEs that have been subcontracted R&D work by a large company. The credit rate is 13% for expenses from 1 April 2020-1 March 2023 and 20% from 1 April 2023 onwards.

Find more information on converting tax relief into payable tax credits here.

Are You Eligible?

The notion of R&D means more than just white-lab-coat activities. Anything from developing new processes, products, or services to modifying existing ones can qualify if they tackle scientific or technological uncertainties.

Your UK-based limited company can claim R&D tax reliefs if: 

  • It incurs R&D expenses linked to your trade or potential trade. 
  • The project aims for scientific or technological advancement.

The Project

To claim R&D tax relief, simply stating you’ve done a project isn’t enough. It must meet HMRC’s R&D definitions, and you’ll need to demonstrate how the project covers:

  1. Advances in the Field: Your project should aim for an overall sector advancement, not just something new for your business. If another company has developed something similar but it’s not public knowledge, it can still count as an ‘advance’.
  2. Scientific or Technological Uncertainty: Your project must tackle issues that aren’t easily solvable by experts in the field. Readily available or easy solutions don’t qualify.
  3. Efforts to Overcome Uncertainty: Detail your research, tests, and efforts to address challenges, highlighting both successes and setbacks and showing genuine efforts to resolve challenges.
  4. Why Experts Couldn’t Solve It: Showcase that even seasoned professionals found the issues complex. Reference others’ failed attempts and your team’s expertise.

Qualifying Costs

Not all expenses qualify for R&D tax reliefs. Here’s a quick run-through of what generally qualifies:

  • Direct Staff Costs: Salaries, wages, and some other related costs of employees involved in R&D activities.
  • Externally Provided Workers: Costs associated with hiring freelancers, staff providers, or external agencies for R&D.
  • Subcontracted R&D Expenditure: Only for SMEs, with restrictions if the work is subcontracted to connected parties.
  • Consumables: Materials and utilities consumed directly in the R&D process.
  • Software: Software used exclusively in R&D activities.

Capital expenditure, travel, rent, and rates typically don’t qualify, so it’s important to consider what does and doesn’t qualify as an eligible R&D expense.

Find out more about what you can and can’t claim here.

Making a Claim

Here’s a step-by-step guide to making an R&D tax relief claim:

  • Identify R&D Projects: Understand which of your projects sought to achieve an advance in science or technology and faced uncertainties that competent professionals couldn’t resolve easily.
  • Calculate Expenditure: Tally up all the qualifying costs associated with those projects during the tax year.
  • Documentation: Maintain a robust documentation process. From project reports to financial records, these documents can be invaluable if HMRC wishes to review your claim.
  • Submit Your Claim: R&D tax relief claims are made in your Corporation Tax Return or amended return. Make sure to complete the full R&D section, including detailed project narratives, and annex the required CT600L supplementary pages. 
  • Deadline: You have two years from the end of the accounting period in which the R&D expenditure occurred to make your claim.

Common Pitfalls and How to Avoid Them

  • Under-claiming: Many companies either overlook or are unaware of the full range of costs that can qualify. Regularly review potential R&D activities and check what’s claimable.
  • Poor Record-Keeping: A lack of evidence or poor documentation can jeopardise your claim. Implement a system to document all R&D activities, decisions, and expenditures.
  • Not Meeting the Definition: Remember, it’s not enough for a project to be innovative. It must seek scientific or technological advancement and tackle uncertainties. Ensure that your project documentation clearly articulates this.

Potential to Propel Innovation

R&D tax reliefs are not just for tech giants or pharmaceutical titans. They cater to businesses of all sizes across numerous sectors. With the potential to recover a substantial portion of your R&D expenditure, understanding and leveraging these reliefs can be transformative for your company and propel scientific and technological innovation.

Navigating the process can be tricky, but that’s where we come in. Our team is here to clear up the confusion and handle the nitty-gritty details for you. So, if you’re feeling even a little overwhelmed or have a question, please don’t hesitate to get in touch. We’re here to make the world of tax simpler for you and, as always, help you make the most of the reliefs available. 

Related news and events

Business Tax & Compliance

19 August 2024

Reducing the Tax Gap: Tips for Small Businesses

Personal Tax

14 August 2024

Exploring Tax-Efficient Investment Opportunities

29 July 2024

Streamlining Client Onboarding with Advanced AML Security Checks

Visit google

Google Reviews

reviews

What do the proposed Companies House reforms mean for small businesses

The UK government has proposed a number of reforms to Companies House, the official registrar of companies in the UK. These reforms should improve the transparency and accountability of companies, making it easier for law enforcement agencies to investigate financial crime. Whilst it might mean some extra admin, it should paint a more transparent picture of a business, helping people make more informed decisions about who they do business with.

There are 3 main proposed changes:

  • Enhanced Identity Verification helps to deter criminals from using companies for illegal purposes.
  • Compulsory filing of profit and loss accounts for all small companies, making it easier for investors, customers and suppliers to assess a company’s financial health.
  • Digital filing only makes it easier for Companies House to process filings and simultaneously help reduce fraud.

Let’s look at the changes in more detail and what they can mean for small businesses.

When and why are the changes happening?

Since February 2022, the UK Government has made clear its intention to expand the role and powers of Companies House to address the increasing misuse of UK corporate identities and improve the accuracy of filed data. The changes form part of the Economic Crime and Corporate Transparency (ECCT) Bill. As the ECCT is still making its way through Parliament, the changes are still at the proposal stage, so the exact timings aren’t yet known. 

The vision of the changes for Companies House is to create a single, cost-effective, sustainable way of filing accounts, which will be secure, transparent and traceable. 

Enhanced Identity Verification

One of the most significant proposed changes is introducing an identity verification process for all company directors, People with Significant Control (PSC), and those filing on behalf of a company. This move is designed to reduce the risk of fraud and ensure accurate information is provided to Companies House.

Implications for Small Businesses: While identity verification may seem like an added layer of bureaucracy, the intention is to protect businesses. By ensuring that only legitimate individuals can register or make changes to a company’s details, small businesses are safeguarded from potentially fraudulent activities. However, it also means that small businesses need to make sure their documentation is always up-to-date and accurate.

Compulsory filing of profit and loss accounts for all small companies

Currently, small companies don’t have to file profit and loss accounts with Companies House. This change would mean that all small companies will be required to file this information annually, making it easier for investors, customers and suppliers to assess a company’s financial health.

Implications for Small Businesses: This change has pros and cons for small business owners. For some, it may mean more paperwork and potential costs. They might have to spend more on accounting help, and competitors could see how they’re doing financially. While it may make things clearer and fairer for everyone, it also means less privacy for the businesses’ earnings. 

Digital filing

Currently, companies can file their accounts with Companies House in paper form using web-based systems or software. Under the proposed reforms, all filings would need to be made digitally. That will make it easier for Companies House to process filings and help to reduce fraud. Companies House has already begun work to move to software-only accounts filing, which will see the removal of all other filing routes for accounts.

Implications for Small Businesses: The move to digital filing could save small businesses time and money. However, it’s important to ensure they have access to the technology and support they need to comply with the new requirements.

The overall impact on small businesses

These reforms are likely to significantly impact small businesses in the UK, particularly having to file profit and loss accounts which could add more administrative burden. But, on the plus side, the increased transparency may help attract investors and customers, making it easier for small businesses to raise finance.

Overall, we believe the proposed Companies House reforms will have a positive impact on small businesses in the UK. They will improve transparency, accountability and security, making it easier for small businesses to raise finance and generate growth.

What can small businesses do to prepare for the reforms?

Nothing will change until after the ECCT Bill receives royal assent, so you don’t need to do anything differently yet. But preparation is key, so, here are our tips on how small businesses can get ready for the reforms:

  • Keep good records. Keep good records of your financial transactions, making it easier to prepare the required accounts for filing. It’ll also demonstrate compliance with the new regulations.
  • Get familiar with the new requirements. Get to know the new requirements by reading the guidance published by Companies House.
  • Seek professional advice. If you need help complying with the new requirements, seek professional advice from an accountant or solicitor.

Following these tips will help you stay on track as the changes come into play. From keeping your records to advice on the changes and what they mean for you and your business, we’re always here to help.

Related news and events

Business Tax & Compliance
Business Tax & Compliance

19 August 2024

Reducing the Tax Gap: Tips for Small Businesses

Business Tax & Compliance

10 July 2024

How to Work Out Your Transitional Profit if You’re Self-Employed

Business Tax & Compliance

18 March 2024

Merging R&D Schemes: What Changes in 2024