As part of a crackdown on fraudulent business activity, Companies House is set to install wholesale changes in how SMEs file their accounts. These are part of the Economic Crime and Corporate Transparency Act (ECCTA) and will start being implemented from September 2025.
A survey conducted by Vistra, however, showed that UK SMEs seem far from ready for the changes. It found that only 28% of UK directors feel prepared for the changes, which include more stringent checks on ID, more thorough accounts, and the adoption of approved accounting software.
Despite just over a quarter of business owners feeling ready for the changes though, figures from Companies House show that only 2.86% of businesses have completed the process so far.
Accounting expert and Case Manager at Forbes Burton, Emma Blyth foresees many struggling with the new demands. She comments that “we saw panic and chaos among UK directors when the ‘Making Tax Digital’ initiative was initially implemented for VAT, and I suspect that similar will occur once these new rules are enforced.”
What’s being changed?
UK directors will be expected to provide identification of their identity, and while Companies House has already put procedures in place to facilitate this, it remains voluntary for now. A notice on Gov.uk, however mentions that “in the future, it will be a legal requirement”.
The way in which accounts are filed will also be changed, with all UK companies needing to use software that’s approved by Companies House. This change becomes mandatory from 1st April 2027.
Business Consultant, Ben Westoby suggests that this might be an issue for companies already wrestling with increased National Insurance contributions and other operating expenses. He said that “the accounting platforms that have been approved by Companies House will only prove to be another expense that many businesses can ill afford to pay. While it will undoubtedly help to make business accounts more transparent, perhaps there should be some concession or discount available to help new adopters”.
Perhaps one of the more controversial changes, though, is the move to remove abridged accounts for small businesses. This amendment will mean that companies will not only have to report far more thorough accounts, but also that their profit and loss figures will easily be available for all to see.
A controversial change
This has inevitably caused a mild uproar which is expected to increase as we draw closer to its implementation date. As of time of publication, this stipulation is expected to be brought in at the start of April 2027, though there have been rumours that it could be paused to come in at a later date instead.
Westoby voiced his concerns over the move, mentioning that it opens up room for negotiation from several different parties depending on the state of an SME’s accounts.
“Businesses are worried about what easy public access to their profit and loss accounts could do to their company. A company’s clients might be able to gauge that they’re your biggest customer and push for a discount knowing that they’re in a strong position, staff may see strong profits as justification for a pay rise, and customers may be deterred from using your company if they think it’s struggling”.
Worried about the forthcoming changes?
Forbes Burton are able to help business owners with a range of problems.
Whether it’s restructuring your company, securing alternative finance, or exiting your business, we have specialists to help.
Speak to one of our friendly advisers today on 0800 975 0380 or email advice@forbesburton.com for practical and helpful advice.
