The UK Economic Crime & Corporate Transparency Act 2023, which received Royal Assent on 26 October 2023, is being implemented in phases over the next few years. The changes being implemented will impact UK-incorporated companies and Limited Liability Partnerships and Limited Partnerships.
On 16 October 2024, Companies House published their Outline Transition Plan. This included an indicative timeline for the introduction of the key provisions of this Act, two of which are the introduction of mandatory ID verification for directors, People with Significant Control (‘PSCs’) and others who make filings at Companies House, and the improvement of the accuracy and transparency of financial information held on the register.
Improving transparency includes mandating software-only filing and removing the ability for small and micro companies to file abridged accounts.
Companies House is aiming to introduce voluntary ID verification in Spring 2025 and to begin the registration process of Authorised Corporate Service Providers who wish to conduct these verification checks. By Autumn 2025, it is intended that ID verification will be a compulsory part of incorporation and for any new appointments of directors and PSCs in existing companies.
A 12-month transition phase will also be launched at this stage for any current directors and PSCs to have their ID verified. The ID verification process for existing directors and PSCs will take place as part of the entity’s annual Confirmation Statement filing process. It is not anticipated that ID verification will be an annual requirement.
Once an individual has had their ID verified, this will remain effective indefinitely, however, Companies House do have the right to ask for reverification at any time. The ID verification procedures will apply to all individuals regardless of nationality or residency.
By Spring 2026, it is also anticipated that ID verification will be a requirement in order to file any documents at Companies House. It should be noted that the above plans require the passing of statutory instruments by Parliament, and so timings may be subject to change.
Furthermore, Companies House plan to mandate software-only filing for all accounts and remove the option for small and micro companies to file abridged accounts. This will result in items such as the profit and loss account, related notes and Directors’ report being presented and filed for all small companies. There is no timeline for the implementation of this change as yet.
Jonathan Reynolds, UK Secretary of State for Business and Trade, made a Statement on 15 October, announcing the Government’s plans to deliver “Invest 2035: The UK’s Modern Industrial Strategy”.
As part of this Strategy, the UK Government intends to uplift the size thresholds for companies, benefitting up to 132,000 companies. The Companies (Non-financial reporting) (Amendment) Regulations 2024 proposes the following updated thresholds:
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Micro |
Small |
Medium |
Large |
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Annual turnover
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Not more than £1m
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Not more than £15m
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Not more than £54m
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More than £54m
|
|
Balance sheet total
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Not more than £500K
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Not more than £7.5m
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Not more than £27m
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More than £27m
|
|
Average number of employees
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Not more than 10
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Not more than 50
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Not more than 250
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More than 250
|
As with the current thresholds, in order for a company to change size category it will need to meet two out of the three qualifying criteria for two consecutive accounting periods, with the current ineligibility criteria remaining.
One of the most significant impacts of this change will be to increase the audit exemption and consolidation exemption thresholds. This will ultimately make the small and micro companies regimes accessible to more companies, as both are driven by the company size thresholds in the UK Companies Act 2006.
Finally, the UK Government also plans to remove redundant reporting requirements in the Strategic and Directors’ Reports, where there is perceived duplication of information, or where current disclosures are not deemed to add any value within the Report. Some minor technical fixes to the UK audit framework will also be implemented at this stage.
Grant Thornton will be providing more detailed information on these significant changes in due course. In the meantime, for further information, and to find out how Grant Thornton can assist you in navigating these changes, please contact Jillian O'Sullivan, Partner - Corporate Compliance.
