Back in February the Department of Business, Energy and Industrial Strategy (BEIS) issues a Whitepaper on Corporate Transparency and Register Reform. This is the Governments final response to a consultation first published in 2019, before it seeks to pass new legislation.
As the name suggests, this reform is directed at Companies House, the agency responsible for maintaining the UK’s register of companies.
The white paper deals with a number of proposed changes, but the one of significant importance to the majority of UK registered companies is the abolishment of the exemption currently available to small and micro companies to file abridged and filleted accounts. In effect, what this abolishment means is that all small and micro companies will be required to file a profit and loss account which will then be readily available to the public via the Companies House website.
This change will allow sensitive commercial information to be available to a company’s competitors, customers, suppliers and employees, but will also feed additional information to credit agencies for the first time. This will therefore also have the potential to affect company credit ratings.
For a long time, owners of small limited companies have benefitted from the limited liability protection a company brings, while still maintaining a degree of confidentiality in respect of the limited information it is required to file at Companies House. However, with these new changes on the horizon along with the increase in dividend tax rates from 5 April this year and the increase in Corporation Tax rates from April 2023, we may see an increase in preference for small businesses to trade under an unincorporated model (sole trader, partnership), where confidentiality can be maintained. Perhaps director shareholders of some established small companies may even seek to disincorporate where they feel privacy is of such importance it outweighs the other benefits of a limited company.
Although it will likely be some time before these measures come into effect, and until legislation is passed there is no guarantee that they will, many believe it is really matter of when, not if. Watch this space!