Companies House Reform – the financial statement changes

Following my previous Insight on 12 February (see Companies House Reform – change begins on 4 March 2024) regarding the changes coming into force from 4 March, four of the five statutory instruments for this reform were passed on 20 February with the fifth expected week commencing 26 February, so these changes are on track, therefore please check out my Insight to see how the first tranche of the Companies House Reform may impact you.

The reform is the biggest change in Companies House history, moving Companies House from a depository of information to a regulator. These changes, as you would expect, are expensive, so to help fund these Companies House have increased filing fees from 1 May 2024. Please see Changes to Companies House fees – Changes to UK company law for full details.

This Insight however is looking ahead at the changes to the financial statements as part of the reform.

Firstly, there will be a requirement for ALL companies, including charitable companies and dormant companies to file their financial statements using accounting software. At the point of mandating this Companies House will cease to allow paper and webfiling for financial statements. Whilst for many of our clients your financial statements will already be prepared on our accounting software so this will not be an issue, but for sectors such as the charity and not-for-profit sector, which has historically seen as many financial statements prepared in Word or Excel as via accounting software, there will be a significant impact. Whilst the details of these changes are not going to be formally announced until later in 2024, the expected implementation date is in the first half of 2026. So, if you are currently using a Word or Excel format for your financial statements this is something you should start considering now, in order to plan a smooth transition to accounting software, which your Ensors contact will be happy to assist with.

Secondly, with accounting software filing, the Company will need a presenter ID, Companies House is currently automating the current manual process of issuing these, during 2024, to ensure they are ready for the potential influx of requests in advance of the mandatory accounting software filing in 2026. If you do not already have a presenter ID, please ensure this is obtained well in advance of the 2026 introduction of the mandatory accounting software filing.

Finally, small and micro sized companies will also see a significant change in their financial statements, with the requirement for both to file a profit and loss account, meaning a substantial increase in the amount of information on the trade being made public. Additionally, small companies will need to file a directors’ report and both will have to include an enhanced audit exemption statement in their balance sheet (where they are not audited). The details of how these changes will be applied is awaiting secondary legislation, however, these are also expected to be mandated from the first half of 2026.

Whilst the changes to the financial statements remain someway off, the impact is worth considering now and if you are affected, please discuss with your usual Ensors advisor, who will be on hand to support and help with these and future changes that come from the Companies House Reform.