Companies House filing shake-up: The impact on accountants
Companies House filing shake-up: The impact on accountants
New company reporting rules are likely to have a major impact not only on the companies themselves but also on the workload of many accounting professionals. What benefits or pitfalls could they potentially bring, and what part can accounts production software play in bringing about a smooth transition to the new reporting regime?
Billed as the biggest change to Companies House since corporate registrations were established in 1844, the government’s Economic Crime and Corporate Transparency Act received royal assent at the end of 2023.
The Bill aims to meet a broad range of ambitious goals, from tackling economic crime and improving transparency to boosting economic growth by increasing the value of the data held on the Companies House register.
Among the changes to company law proposed in the act, small companies and micro-entities are likely to have to file a full profit and loss account, with small companies having to also file a director’s report, both of which will be available on the public register.
Software-only filing coming soon
The Bill also mandates a transition towards filing accounts by software only, with full tagging of financial information in iXBRL format.
The timetable for the move to digital accounts has yet to be finalised, but according to a government page on the changes, they will be phased in over the next two to three years, with more precise timings to be shared “soon.”
The new rules will bring an increasing number of companies into the full reporting regime and are likely to have a major impact not only on the companies themselves, but also on the workload of the many accounting professionals who work for or with these businesses.
Ashley Goldsmith, Senior Product Manager for Accounts Production at financial reporting and auditing software provider, Caseware, spoke with AccountingWEB about the changes, what impact they are likely to have on the accounting profession, the benefits or pitfalls they may bring, and what part accounts production software could play to ensure a smooth transition.
Finalising the details
While the Bill has gone through parliamentary process, the precise details are still yet to be finalised.
“We’re still unsure about the exact format of the new rules,” said Caseware’s Ashley Goldsmith. “Whether it’s the full P&L as we know it or a slimmed-down version, and whether all information will be on the public record or not.”
In terms of the process, now the Bill has received Royal Assent, Companies House is responsible for putting the final details in place, which are then examined and rubber-stamped by the government.
The impacts
When it comes to the impact on both the companies and their accountants, Goldsmith believes that, given the mandation to file electronically, the rule changes will almost certainly drive increased software adoption.
Given the additional information needed, the new rules will undoubtedly lead to more work that needs to be completed by every entity that needs to file. However, there may be ways in which practitioners can simplify or streamline this additional workload.
“From a working perspective, using software can make this type of filing more straightforward in some ways,” he said. “Currently within Caseware, there is the option to easily flick between the two options: the 'filleted' and the full version. Going forward, you will just have one version of the Accounts which is shared with all stakeholders.”
According to Goldsmith, the new rules may also result in company disincorporations as business owners scramble to avoid their data going public.
“If it proceeds as planned, companies will have to disclose more information. Certain companies wouldn’t want their full P&L in the public domain as it could contain sensitive information that will then be available for anyone to scrutinise.”
Do the pros outweigh the cons?
Given the limited liability afforded to companies, changes to Companies House filing were perhaps inevitable, but will the rules come with any advantages over the old reporting regime?
Goldsmith told AccountingWEB that while there were likely to be some benefits, including the streamlining mentioned above, whether they outweigh revealing your company’s financial information will vary from business to business.
“The ability to standardise your approach across all entities may well be more beneficial to the smaller end of the market that doesn’t use software currently,” said Goldsmith.
“More data in the public domain will also mean that benchmarking and comparability with competitors and different industries will be easier, as the quality of data will improve dramatically. From a company’s perspective, you can compare your figures (which you’ve always known) with your rivals to see if they’re performing better than you are on things like gross profit, margins and other ratios.
“This information will be of more use to other stakeholders such as investors, as it will make it easier to get worthwhile information – you can’t really get much detail from a filleted set of accounts.”
However, Goldsmith added that the potential benefits of the rule changes to companies or accounting firms would vary on a company-by-company, or firm-by-firm basis.
Software streamlining
Goldsmith used the last major change to accounts data as a prime example when looking at the part accounts production software could play in bringing about a smooth transition to the new reporting regime for accounting firms.
XBRL came into force in the UK on 1 January 2010, making it compulsory for companies to send their company tax returns online using Inline XBRL (iXBRL) for accounts and computations from 1 April 2011 for accounting periods after 31 March 2010.
“When iXBRL came in, many mid-tier accounting firms adopted Caseware because a large part of the tagging framework was already built into our desktop software at the time and we could present a fully automated solution,” said Goldsmith.
“Our tagging tool is flexible,” he added. “We offer standard notes and XBRL contexts out of the box, and, if you deviate from standard terms and make an amendment to a row or a description, it’s easy to customise those tags. Although the vast majority of customers just use our automatic tagging solution, there is flexibility to tag additional content, save custom tags and use those saved custom tags on other engagement files.
“The benefits of cloud software from an iXBRL standpoint are that we’re building on the knowledge of our desktop product to enhance things like error trapping. For example, if you were trying to tag a balance sheet item and use a duration date rather than an instant date, the system would pick up that you weren’t using the correct context.”
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