In a significant development for the business landscape, the Economic Crime and Corporate Transparency Act 2023 was passed on 26th October 2023.
This landmark legislation introduces crucial changes in how small companies and micro-entities report financial information to Companies House. These changes will have a far-reaching impact on businesses, ensuring greater transparency and accountability in the corporate world.
In this blog, we delve into the key provisions of the Act and understand how they will affect small businesses.
Who Is Affected?
To determine which companies fall under these new rules, the Act defines specific criteria for both small companies and micro-entities.
Small Companies: A small company is one that satisfies at least two of the following conditions:
- Turnover of over £10.2 million or less
- £5.1 million or less on its balance sheet
- 50 employees or fewer
Micro-Entities: Micro-entities are defined as companies that meet two of the following criteria:
- Turnover of £632,000 or less
- £316,000 or less on its balance sheet
- 10 employees or fewer
Main Changes That Small Business Owners Should Be Aware Of
Reporting Profit and Loss:
Under the new regulations, small companies and micro-entities will be required to file a profit and loss account. This change aims to make financial performance data readily available on the public register, enhancing transparency and trust in the business community. In addition to the profit and loss account, small companies will also need to file a director’s report, further bolstering financial disclosures.
Elimination of Abridged Accounts:
The Act eliminates the option for companies to prepare abridged accounts. Abridged accounts allow businesses to present a condensed version of their financial statements. With this option removed, companies will need to provide more comprehensive financial information, offering a clearer picture of their financial health.
When Will These Changes Happen?
The majority of the Act’s provisions will be implemented through secondary legislation, which is yet to be published. Additionally, some of the changes will require significant development and upgrades to Companies House systems and procedures. As a result, businesses should prepare for a transition period as these changes are put into practice.
We Are Here to Help
If you have questions or need guidance on how these new regulations affect your company, don’t hesitate to reach out to us. Our expert team of accountants and financial advisors is well-versed in the latest developments in corporate reporting.
At KPP, we are committed to supporting your business’s success. We can provide tailored solutions to ensure a smooth transition and help you meet the new requirements with confidence.
Get in touch with us today, and let’s navigate the future of financial reporting together
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If you want us to handle your accounts or wish to speak to us about any accounting questions, you can book an initial consultation online or give our office a call.
