The Economic Crime and Corporate Transparency Act (ECCTA) is a huge piece of legislation, which will need around 50 Statutory Instruments to be passed in order to implement all the measures. Among other things, the ECCTA aims to improve transparency by making more financial information available to the public.

One of the most commonly asked questions by accountants where the future filing requirements for small and micro-entities are concerned is: ‘When will this happen?’

We have now been given some indication as to the accounts reforms as part of the ECCTA. Stakeholders can expect an email about these changes before 1 July 2025 (some have already received it).

Software-only filing

To achieve digitisation of all filing routes, Companies House will require all accounts to be filed using commercial software from 1 April 2027. This means that Companies House’ web-filing and paper routes will be closed for accounts filings (though they will remain open for other statutory filings).

The objective of this change is to enable more efficient and secure filings for companies and to improve the quality of data that is held on the public record. Companies House also claim that software-only accounts filing will create a single, cost-effective, sustainable and traceable way in which to file accounts. In addition, the ECCTA contains measures to enable this to happen.

The government will therefore notify all those concerned that they will need to find suitable software to enable software-only filing once web-based and paper filing options are withdrawn.

In practice, most firms file accounts electronically on behalf of clients, so that shouldn’t be an issue. However, where a company may not have software to file its accounts, then it will have to either source such software or ask their external accountant if they will file them electronically.

Filing options

Currently, there are a number of filing options available for small companies. For example, filing the full accounts (rare); filleted accounts (common); and filleted abridged accounts (very common).

From 1 April 2027:

• Micro-entities must file a copy of their balance sheet and profit and loss account to the Registrar. No directors’ report will be needed as micro-entities have been exempt from preparing a directors’ report since accounting periods commencing on or after 1 January 2016.
• Small companies must file a copy of the balance sheet, directors’ report, auditor’s report (unless exempt) and profit and loss account to the Registrar.

The option to prepare and file abridged financial statements will be abolished.

Companies Act 2006, Section 468A Use or disclosure of profit and loss accounts for certain companies does allow the Registrar to use their discretion in not making available for public inspection the profit and loss account (or parts of them) for both micro-entities and small companies.

At the time of writing, it is uncertain which ‘certain companies’ this provision would relate to or how this provision might be exercised.

Claiming audit exemption

The audit exemption thresholds have recently been increased in line with the small companies’ thresholds for accounting years commencing on or after 6 April 2025. To that end, more companies will be able to claim audit exemption on the grounds they are small companies.

Small companies claiming audit exemption already make a statement on the face of the balance sheet that the members have not required the company to obtain an audit of its financial statements in accordance with Section 476 of Companies Act 2006.

However, there will also be an additional statement required by the directors on the face of the balance sheet. This additional statement will require the directors to specify which exemption is being claimed, and they will need to confirm that the company qualifies for the exemption.

Shortening an accounting reference period

Finally, in terms of shortening an accounting reference period, Companies House will limit the number of times this can be done by a company. Effectively, a company will only be able to shorten an accounting period once every five years (i.e. it will be aligned to the number of times a company can lengthen an accounting period).

If a company wishes to shorten the period more than once in a five-year period, it will have to provide a business reason before permission can be granted.

Conclusion

These measures should not come as a surprise to many accountants or clients as the new filing regime has received much publicity. It is only now that we have been given an indication of the planned timeline for implementation of these accounts reforms from the government.

Of course, there are going to be clients (and accountants) who disagree that filing a profit and loss account is necessary – particularly when it might provide certain information that could be deemed commercially sensitive by directors. Conversely, there are those that will welcome these reforms.

Preparers should also bear in mind that small entities in the UK applying FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, Section 1A Small Entities will be required to make more disclosures in the financial statements for accounting periods commencing on or after 1 January 2026. This is because of the FRC’s amendments to Appendix C Disclosure requirements for small entities in the UK which (among other things):

• elevates all the encouraged disclosures in Appendix E Additional disclosures encouraged for small entities into Appendix C (hence Appendix E in FRS 102 (September 2024) is only relevant to small entities in the Republic of Ireland)
• requires additional disclosures in respect of:

           o  leasing

           o  revenue recognition

           o  provisions and contingencies

           o  current and deferred tax

           o  share-based payment arrangements

• includes extended related party disclosure requirements.

Resources

Technical factsheet: Lease accounting under FRS 102

Technical factsheet: Revenue recognition under FRS 102 (September 2024)

These additional disclosures may also be seen by some as being a ‘double-whammy’ to the disclosure of sensitive information as they will be included in the financial statements delivered to Companies House.