More changes coming at Companies House to tackle fraud!

More changes coming at Companies House to tackle fraud!

As Companies House continues its rollout of ‘new powers’ to improve the quality and reliability of its data and clamp down on abuse of the companies register, details of what is coming next are below….

The companies house register, which is used an amazing 14 billion times each year, will utilise the new powers to clean up the register. Companies House said, ‘we will use data matching to check the company details and we will do more and more as time passes.’

It seems that a significant IT investment will be required, which could take a number of years. Companies House has advised it has already heavily invested in ‘data science capabilities’ to keep up to date with technology which is changing all the time.

Companies House continues to grow in staff numbers The organisation has grown quite dramatically in the last year with the recruitment of new staff who will initially be dealing with the rollout of the new identity verification using the new Gov.uk One Login, which is replacing Government Gateway accounts. See our blog from March 2024 https://kennedysaccounting.uk/hmrc-unveils-plans-to-replace-government-gateway-accounts-with-one-login-insights/.

Companies House is also planning to introduce compulsory identity verification in 2025, as well as streamlining accounts filing requirements for small companies to require all companies to provide profit and loss accounts, a director’s report where accounts are not audited, and no more abridged accounts from 2026.

The initial timescale for all these changes will start over the next 2 to 3 years, and will be phased in.

The first measures under the Economic Crime and Corporate Transparency Act 2023 (ECCT Act) came into force on 4 March 2024 which are the catalyst for the changes.

Until now Companies House have had quite limited powers to question information, however under the new rules, they will be able to take a much more robust approach and will be able to query information already on the register. This will see officials at the registry challenging any inconsistences from new and existing entries on the register, for example, if a company has unusually high share capital, or directors registered at other addresses, then this will be investigated, other changes include greater powers to question information and request supporting evidence with more robust checks on company names and the ability to remove factually inaccurate information.

A further change which has already come into play is that companies are not able to use a PO Box as their registered office address and must have an appropriate address at all times. As a consequence of this, Companies House has written to a large number of companies telling them to change their addresses as they are currently using PO Box numbers with a deadline provided for the change.

Going forward subscribers to new companies will need to confirm they are forming a company for a lawful purpose when they incorporate, and for a company to confirm its intended future activities will be lawful on its confirmation statement with effect from now.

In order to target criminal abuse of the register, Companies House will now be able to share information more proactively with other government departments, including HMRC, and law enforcement agencies.

Companies House has already started sharing trust data from the register of overseas entities with other departments, which they have advised ‘is proving to be a really rich resource of data especially for HMRC.’

There will also be new criminal offences and civil penalties for failure to comply with the rules. A penalty of up to £10,000 could be imposed directly as an alternative to a criminal prosecution. The regulations are likely to come into force during May 2024. 

Companies House CEO was quoted as saying: ‘These new and enhanced powers are the most significant change for Companies House in our 180-year history.

We’ve known for some time that criminals have misused UK companies to commit fraud, money laundering and other forms of economic crime.

As we start to crack down on abuse of the register, we are prioritising cases where people’s names and addresses have been used without their consent. It will now be much quicker and easier to report and remove personal information that has been misused. This will make a real difference to individuals.’

From 1 May 2024, Companies House have increased their fees to take new future expenditure into account, as well as making sure costs are recovered from existing expenditure, and note this is only the first phase of measures to improve corporate transparency. There will be further legislation required to enforce new reporting rules for smaller businesses with the introduction of mandatory profit and loss accounts, an end of abridged accounts, and the new failure to prevent fraud offence.