By email to: CompanyFilingReqts@bis.gsi.gov.uk 22 November 2013 To: Company Law Simplifications Team The Department for Business, Innovation and Skills Spur 2, Level 3 1, Victoria Street London SW1H 0ET Dear Sirs Re: COMPANY FILING REQUIREMENTS The Society of Professional Accountants welcomes the opportunity of commenting on this consultation and herewith is our response for your consideration. Please let us know if you would like to discuss with us any aspect of our reply. Yours sincerely Peter J D Mitchell Chairman
THE DEPARTMENT FOR BUSINESS, INNOVATION AND SKILLS COMPANY FILING REQUIREMENTS Response by THE SOCIETY OF PROFESSIONAL ACCOUNTANTS 22 NOVEMBER 2013 PETER J D MITCHELL, FCA, FCCA, CHAIRMAN 2
COMPANY FILING REQUIREMENTS INDEX Section Page 1. Executive Summary 4 2. Background to The Society of Professional Accountants 6 3. Detailed Responses to Questions Posed 7 3
COMPANY FILING REQUIREMENTS 1. EXECUTIVE SUMMARY 1.1 The Society of Professional Accountants (SPA) is wholly supportive of initiatives that reduce time and money spent on regulation, whether through computerisation of continuing procedures, or elimination or simplification of current regulations. 1.2 Our members regard the information recorded at Companies House to be of significant importance and usefulness for those dealing with companies having public interest attributes. Where such a necessary interface does not exist, as in the case of the very large numbers of small owner managed companies, we endorse the plan to keep published information to a minimum in order to protect their privacy and minimise opportunities for identity theft. 1.3 The proposals in your consultation paper address areas affecting all our limited company clients and who are predominantly owner managed, and many of whom have already embraced online filing at Companies House. 1.4 Many of our limited company clients view their Companies House records as the formal statement to the public of their corporate fabric, and the opportunity of eliminating a parallel record at the Company s registered office would avoid duplicated effort and provide some small costs savings. 1.5 We remain concerned with the quality of some accounts accepted by and filed at Companies House, and recommend that quality checks be stepped up to ensure that basic information is present in an approved format, for example that share capital is present. It would be worth paying 5 more than the current Annual Return fee if this enabled Companies House to police the quality of filed accounts effectively, as this would improve their reliability in the eyes of the public. 4
(The Companies House fee may be compared with the annual fee payable to the Information Commissioner s office for Data Protection, currently 35, but where the benefits to members or users are far less obvious). 1.6 In practice the majority of our members use software from reputable suppliers to produce accounts in statutory format, and where the incidence of format or content error is believed to be very low. 1.7 The opportunity to synchronise filing dates for the Annual Return with the annual accounts can be achieved already by early filing of the former, but this facility may not be widely known and should be communicated more widely by you. 1.8 Similarly, the opportunity to file annual accounts with HMRC three months after the Corporation Tax Return is filed is frequently avoided by filing both documents at the same time; the available simplification - requiring that both be filed within 9 months of the year end - is for HMRC to determine. 1.9 We maintain that Companies House filing requirement for small company accounts, which we understand to be the vast majority of all companies trading, and which permit just an abbreviated Balance Sheet to be filed, continue to be sufficient for owner managed companies and should be maintained in order to protect their privacy; if suppliers or banks require more detail then this can be requested direct from the company concerned. 1.10 Providing an Abbreviated statement of the annual accounts is a relatively simple and cost free task given that reputable accounts production software is used. SPA will be pleased to expand on any of the topics summarised above or on the responses to the specific questions posed. 5
COMPANY FILING REQUIREMENTS 2. BACKGROUND TO THE SOCIETY OF PROFESSIONAL ACCOUNTANTS 2.1 SPA is a wholly independent society of small practitioners holding a qualification issued by a recognised professional accountancy Institute. It was formed in early 1996 and currently there are some 1400 principals in 1000 member practices. Our members provide accountancy and taxation services to an estimated 150,000 private businesses and around 450,000 individuals. Of the private businesses served by our members around 50% are incorporated, representing around 2% of the UK Company Register, and where most do not have employees other than the directors. 2.2 The Society s stated policy is to promote and improve the relationship between members and their Institutes by providing constructive criticism together with practical proposals for improvements. Further to provide commentary and proposals to other authorities influencing members practising environment. 2.3 SPA has previously made submissions on small businesses limited company activities to the DTI on Audit Exemption levels, to the Accountancy Standards Board on Financial Reporting Standards for Small Entities (FRSSE), to the DTI on Modern Company Law Developing the Framework, to the Chancellor of the Exchequer concerning individual tax payers on Advancing Self Assessment Tax Return Filing Dates, and to HM Revenue and Customs on various tax and NI consultations impacting on small practices and their clients including Simpler Income Tax for the Simplest Small Businesses, Securing Compliance with Real Time Information Late Filing and Late Payment Penalties and Simplifying the National Insurance Processes for the Self Employed. 6
COMPANY FILING REQUIREMENTS 3. DETAILED RESPONSES TO QUESTIONS POSED Question 1 (paragraph 45) Do you agree that the requirement to file an annual return is removed and that the system relies on event driven filing? For many small owner managed companies the information within an Annual Return may not change throughout that company s life. However, we maintain that annual confirmation that CH information remains current is a reasonable regulatory burden, ensuring that public records remain complete and reliable. Question 2 (paragraph 45) Do you agree that companies should be allowed to simply check and confirm that their information is up to date once a year? See response to Question 1. We maintain that companies should file any changes in Annual Return information within four weeks of the event taking place. Question 3 (paragraph 45) Do you wish to retain the annual return? See responses to Questions 1 & 2. Question 4 (paragraph 45) Do you agree that the SIC code should be required at incorporation and maintained as part of an annual check? As the nature of a company s activities, and the matching with a SIC code, is not essential preliminary data we suggest this be filed within four weeks of the Company commencing to trade. It would then form part of the annual confirmation. (See response to Question (1) above). Question 5 (paragraph 51) We would welcome views on the impact on companies and on the transparency of the register of aligning filing dates for accounts at both HMRC and CH. 7
In practice many company accounts are filed at the same time with both HMRC and CH, i.e. within 9 months of the Accounting Period and hence there would be little impact if HMRC chose to reduce their filing date for the Corporation Tax Return, for which 12 months is provided to the CH filing date. Question 6 (paragraph 60) Do you agree that for those companies whose directors and shareholders are the same people, the requirement to make their registers available at their Registered Office or SAIL should be removed? We agree with this suggestion which would eliminate a duplicate record for private owner managed companies. Our experience is that almost no requests to inspect such records have ever been made. In practice the CH records are regarded as the finite record of such companies. Question 7 (paragraph 68) Should private companies have the option of holding their registers at CH, in the same way that they are able to nominate a SAIL? We agree with this suggestion. Question 8 (paragraph 74) Should dates of birth be suppressed in part, or in full? We agree that date of birth should be suppressed in full as this appears to be unnecessary information and has assisted identity theft. Question 9 (paragraph 79) Should the Statement of Capital requirements be changed, as set out above? We agree with the suggested statement of Capital requirements as outlined in your consultation document. Question 10 (paragraph 82) Should the statement of capital on formation requirements be the same as the other statement of capital requirements throughout the Act? 8
We agree with this statement. Question 11 (paragraph 87) Do you think companies should only have to supply a statement of capital on a specified date if they have not updated their information within the year? We agree that annual confirmation of all information incorporated within an Annual Return should include a statement of issued capital. Question 12 (paragraph 89) Should we amend S. 555 to rely on Articles of Association to provide information on allotment of shares? We maintain that information on allotment of shares is significant when determining the ownership of a company and, as such, filing the prescribed form should continue. Question 13 (paragraph 101) Do you agree that companies with subsidiaries must include a total number of subsidiaries? If not, why? We agree with this statement. Question 14 (paragraph 101) Do you agree that the information must always be included in the accounts? We agree with this statement. Question 15 (paragraph 108) Are there any notices that should not be sent electronically? We do not consider there are any notices that should not be sent electronically. This method of communication is increasingly accepted as efficient and reliable. Question 16 (paragraph 108) 9
Do you agree that the email address should be made available to other public authorities, specified in law? We agree with this statement. Question 17(paragraph 108) Are there any other means of electronic communication that CH should explore? None that we can suggest. Question 18 (paragraph 111) Do you think companies should be able to supply the Registrar with additional information, such as a website, to display on the public record? We consider that such a facility, which may suit certain companies, should be an optional additional service for which it is anticipated a further small fee may be charged. Question 19 (paragraph 114) Do you think that CH has the balance between upfront validation and verification and quick and effective remedy right? We agree with this statement in view of the relatively low number of issues raised post incorporation. Question 20 (paragraph 127) Do you agree that there should be a requirement for the Registered Office to have a link to the company? We agree with this statement. Question 21 (paragraph 127) What criteria do you think should be specified to evidence an effective Registered Office? We agree with the following criteria listed in your consultation: a) The company must be owner/leaseholder/occupant of the building b) The company has the permission of the occupant 10
c) Correspondence will, or is likely to, reach the company officials; and We maintain (d) is not required. Question 22 (paragraph 127) Do you think replacing an ineffective Registered Office address with a Director s address is a viable approach? We agree with this statement which would assist our members in a few instances where a company client, whose registered office is that of the appointed accountants, moves away to another accountant, or will not communicate to its appointed accountant its current status. Question 23 (paragraph 138) Do you agree that the consent to act should be replaced with a simple confirmation that the company holds the consent? We agree with this statement. It would ordinarily be represented by a Board Minutes plus a Contract of Employment where appropriate. Question 24 (paragraph 138) Should companies be required to provide evidence of a Director s appointment, in the event of a dispute? We agree with this statement see response to Question 23. This would also apply to a disputed resignation of a director. Question 25 (paragraph 146) Do you agree that there should be an accelerated strike off process particularly in the event of a company hi-jacking an address? We agree with this statement. Question 26 (paragraph 146) Are there any potential consequences of an accelerated strike off process that we should bear in mind? 11
Given the simplicity of incorporating a new company we are concerned that the suggested accelerated strike off process may not prevent further phoenix companies being set up, and suggest quality checks in this area may prove beneficial. The suitability of directors, associated with an accelerated strike off, being appointed to newly established companies should be considered. Question 27 (paragraph 146) Are there any other circumstances in which an accelerated strike off process would be appropriate? representing around 7% of the UK Company Register None that we can suggest. Question 28 (paragraph 149) We would welcome views on the assumptions and estimates used in the costs benefits analyses, particularly where we have not been able to quantify some of the costs and benefits. We accept that the updating and modernisation of the CH Annual Return will provide small savings to companies concerned, and are pleased to note you identify the front end investment by directors to become familiar with the new arrangements. It is more important that the integrity and reliability of CH records be maintained and enhanced. Question 29 (paragraph 149) Are there any other costs or benefits that should be included in the analyses? None that we can suggest. Question 30 (paragraph 149) We would welcome views on likely take-up of proposals, particularly in relation to company registers and electronic communications. We would anticipate that the take-up of your proposals amongst our members would be high at least 85%. Do you have any other comments that might aid the consultation process as a whole? 12
Please use this space for any general comments that you may have, comments on the layout of this consultation would also be welcomed. None that we can suggest. PLEASE ACKNOWLEDGE THIS REPLY The Society of Professional Accountants 95 High Street Great Missenden Buckinghamshire HP16 OAL 01494 864414 www.spa.org.uk email: mail@spa.org.uk 13