It was around a year ago when the first raft of reforms to Companies House started to come to fruition – something billed as the most fundamental change in company law in decades.
Following the introduction of the Economic Crime and Corporate Transparency Act (ECCTA), gradual changes are expected over the next two years to scrutinise companies and hand power to Companies House to ‘strike off’ businesses that aren’t complying with the rules.
In February, new rules were due to come into force allowing accountants to voluntarily register to validate clients’ identities on behalf of Companies House. However, the changes were abruptly postponed the day before because of technical issues.
There’s a fear that accountants will turn into the arbiters of identity for Companies House
While this will give accountants and the wider business community some breathing space, firms shouldn’t rest on their laurels. In the coming years, there’s going to be more responsibility for policing clients, and there’s now a fear from within that, before long, accountants will turn into the arbiters of identity for Companies House.
Adding to the burden
Accountants will soon be able to voluntarily register to become an Authorised Corporate Service Provider (ACSP). This will give them the authority to carry out identity verification checks on clients, including when documents and changes are being filed.
This new responsibility positions accountants as de facto gatekeepers of corporate integrity, adding to their ever increasing professional duties. The move is designed to streamline the process of identity verification, but it also means that accountants will experience an additional administrative burden.
Many businesses, particularly SMEs, already operate within tight deadlines during filing periods. Verification changes are likely to place even greater pressure on their resources.
Mistakes or inaccuracies in submitted information could lead to financial penalties
Accountancy firms will need to carefully consider whether they should register as an ACSP or look to external verification services for support. The choice will depend on the firm’s ability to integrate verification processes efficiently and ensure compliance without detrimentally affecting its core services.
Prepare for more questions
Gone are the days of Companies House passively accepting and filing submissions without scrutiny. The ECCTA will introduce more stringent reviews of accounts and documents being filed, and it’s likely that accountants will see an increase in queries from Companies House. While this rigorous checking is a welcome step in tackling fraudulent businesses, it could also leave accountancy practices overwhelmed with queries, making even the simplest filings more complex.
Accountants will need to be prepared for this heightened scrutiny. Mistakes or inaccuracies in submitted information could lead to further investigation, rejections or, in the most serious cases, financial penalties. Firms must ensure that their record-keeping and data submission processes are robust enough to withstand this increased oversight.
Having designated compliance officers could help firms stay ahead of any potential issues
In practical terms, this means developing a system to pre-emptively review submissions before they reach Companies House. Having designated compliance officers or a dedicated team to manage filings could help firms stay ahead of any potential issues. Additionally, practitioners should encourage clients to maintain meticulous records to prevent unnecessary delays or rejections when filing documents.
Proactive steps
It’s likely that many firms will have to register as an ACSP to service their client’s needs and, while this will create an administrative burden, there are things firms can do to be proactive.
The first step is to review your internal processes and assess whether they’ll be fit for purpose once the changes come into effect. Firms should ensure that their team members are adequately trained in identity verification processes and fully understand their legal obligations, particularly from an anti-money laundering perspective. Investing in staff education will be crucial in navigating these regulatory changes.
To help streamline identity checks, firms should consider investing in secure digital solutions that can facilitate faster and more accurate verification processes. This includes implementing secure document verification software and biometric authentication, and improving cybersecurity measures to protect sensitive client data.
Artificial intelligence can also play a role in assisting with identity verification and filings at Companies House; however, it’s essential to maintain human oversight here. Businesses should ensure that all information is manually reviewed before submission to minimise the risk of errors or misinterpretations by automated systems.
Perhaps the most critical step firms can take is to educate their clients about the upcoming reforms – the sooner, the better.
Aside from changes related to identity verification, businesses will also need to be aware of additional reforms, including new rules on registered office addresses, new email address requirements and increased fees for certain services.
By keeping clients informed, practitioners can ensure that businesses remain compliant and avoid unnecessary penalties or disruptions.
There’s no other option than for the sector to grab the bull by the horns and adapt
The bigger picture
The reforms to Companies House represent a drastic change in how business is regulated, and accountants will undoubtedly play a big part in that. However, these new rules risk placing more of an administrative burden on the accountancy sector, especially when there is a shortage of talent.
We must remember that parliament has already enacted the legislation underpinning these changes, so there’s no other option than for the sector to grab the bull by the horns and adapt as quickly as possible.
More information
See ACCA guidance on the reforms: ‘Changes to company law under ECCTA’ , ‘Company law reform aims to reduce red tape’, ‘Companies House reform and identity verification’ and ‘Companies House reforms and the new ECCTA’
