Profit & Loss will become mandatory when filing for small companies from 2027

Profit & Loss will become mandatory when filing for small companies from 2027

Major changes to filings for small companies will come into force shortly with compulsory profit and loss accounts and balance sheet disclosures.

Companies House will begin streamlining the accounts filing options for small and micro-entity companies as well as the abolition of abridged accounts from 1 April 2027 when these new more demanding reporting requirements come into place.

This will mean that.

Micro-entities will be required to file a copy of their balance sheet and profit and loss account at Companies House.

Small companies will be required to file a copy of balance sheet, directors’ report, auditor’s report (unless exempt) and profit and loss account.

This higher level of disclosure is designed to improve transparency as companies will no longer be able to prepare and file abridged accounts.

There will also be a requirement for more information when claiming an audit exemption. In future, any company claiming an audit exemption will need to give an enhanced statement from their directors on the balance sheet. 

These changes are also designed to clamp down on abuse of dormant company status, as Directors of dormant companies will need to specify which exemption is being claimed and confirm that the company qualifies for the exemption.

Companies House has also warned: ‘Evidence from law enforcement agents show that some companies file dormant company accounts and claim the dormant audit exemption, despite their bank accounts clearly showing that the company does not meet the definition of a dormant company.’

From April 2027, Companies House will also curtail the number of times a company can change accounting reference periods to once in a five-year period.

‘We are limiting how many times a company can shorten its accounting reference period,’ Companies House stressed. ‘A company will have to provide a business reason if they want to shorten the period more than once within five years.’

The new framework is part of the Economic Crime and Corporate Transparency Act 2023, and the regulations are set out in section 396 Companies Act 2006.

These reforms are designed to ensure that the companies register is more reliable and accurate and should also give higher standards of disclosure and reduce fraud and error.

At present a company is ‘small’ if, in a year, it satisfies any two of the following criteria:

• a turnover of £10.2m or less.
• £5.1m or less on its balance sheet; and
• 50 employees or fewer.

At present a company is a ‘micro-entity’ if, in a year, it satisfies any two of the following criteria:

• a turnover of £632,000 or less.
• £316,000 or less on its balance sheet; and
• 10 employees or fewer.

‘These reforms are designed to achieve a better balance between greater transparency and minimising burdens on business. They address concerns about the potential impact of inaccurate or insufficient financial information on the companies’ register being used to inform important business decisions,’ Companies House stressed.

‘Ensuring all companies report sufficient information to determine a company’s size and eligibility to file under size specific regimes will improve the value and reliability of the information.’