Accounts and audit exemption

Implementation status: Not yet in force – commencing 1 April 2028

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Overview

Under the Act, the government is reforming how companies report information and what information they report when filing their annual accounts with Companies House. The accounts reforms seek to improve the transparency, accuracy and reliability of data on the register.

Following the recommendations of the Small Business Regulatory Taskforce, the government has decided to pause implementation of changes to the Companies Act 2006 that require micro entities and small companies to file profit and loss accounts at Companies House. These amendments were due to be implemented from April 2028. 

The Act also introduces a requirement for companies relying on an audit exemption to identify the exemption being relied on and to confirm that the company qualifies for that exemption.

Legislative powers under the Act also allow for mandatory digital filing of accounts.

Companies House has announced that these additional measures will be implemented from 1 April 2028.

Company accounts

The Act amends the Companies Act 2006 (CA 2006) to streamline the existing filing framework for small and micro entity companies. The reforms focus on what information is filed at Companies House and not on the underlying obligations for companies to prepare accounts.

The rationale for these changes is to reduce the risk of deliberate misuse of minimal disclosure options to hide money laundering and other fraudulent activity.

If implemented, the new rules will be as follows:

  • Micro-entities: Companies that satisfy the micro-entity qualifying conditions will be required to file a balance sheet (with less information than for a small company) and, as a new requirement, a profit and loss account (though they will be able to opt out of publishing the profit and loss account on the public register). A micro-entity will also be required to deliver a copy of the auditor’s report on their accounts unless the company is exempt from audit and the directors have taken advantage of that exemption.
  • Small companies: Small companies that do not meet the micro-entity threshold will be required to prepare and file a balance sheet, a profit and loss account and an auditor’s report (unless exempt). Small companies were not previously required to file their profit and loss account at Companies House, but, if implemented, this change will be mandatory. However, as in the case for micro-entities, small companies will be able to opt out of publishing their profit and loss account on the public register.

The effect of these provisions is to remove the option for companies to file abridged accounts or filleted accounts and will ensure that key information, such as turnover, is filed at Companies House.

As detailed above, the government has decided to pause the implementation of these reforms, and they will no longer come into force on 1 April 2028 as previously indicated. During this pause, the government will explore options for streamlining Companies House and HMRC filing processes, under the “tell Government once” ambition. In practical terms, this means that the government will continue to allow companies to file abridged accounts and retain the option for smaller companies to remove, or “fillet” their profit and loss information from the accounts filed at Companies House after 1 April 2028.

Exemption from audit requirements

The Act introduces a new requirement into the CA 2006 for directors to make a statement when claiming an audit exemption.

From 1 April 2028, any company claiming an audit exemption will need to give an enhanced statement from their directors on the balance sheet. The statement must confirm the identity of the exemption being relied on and that the company qualifies for that exemption.

The requirement for companies to file an eligibility statement will provide the Registrar with additional evidence to take stronger enforcement action for false audit exemption filings in the future.

Filing accounts by software

The Act lays the foundation for Companies House to require all companies to file accounts in digital format. Companies House has confirmed that, from 1 April 2028, all accounts filings (including dormant accounts) must be filed in Inline eXtensible Business Reporting Language (iXBRL) format using commercial software. The Companies House web and paper routes will be closed for accounts filings but will remain open for other statutory filings.

Software-only filing supports the goal of a fully digital filing service and will help to prevent economic crime and bring the UK in line with international best practice.

Miscellaneous

The Government has confirmed that from 1 April 2028 it will limit the number of times a company can shorten its accounting reference period. A company will have to provide a business reason if it wants to shorten its accounting reference period more than once within 5 years. This change is subject to regulations that have yet to be published.

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