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The minister is to shelved the reforms to corporate housing, which had been requiring businesses to submit accounts in more troubling ways, as part of the government’s attempts to reduce the deficit of UK PLCs.
Under the law brought by the previous government, from April 1, 2027, SMEs will be required to disclose their profit and loss statement for the first time as part of their annual account.
The proposal is designed to remove long-standing exemptions that allow these companies to submit “abridged accounts.”
Additionally, all companies must submit annual accounts using compliant software in a form known as IXBRL (Inline Extensible Business Reporting Language).
But Jonathan Reynolds’ allies said the business secretary would reverse plans to reduce the burden of corporate regulations. “As long as Johnny is in place, this won’t happen,” they said. “It doesn’t meet plans to cut regulations.”
The Economic Crimes and Corporate Transparency Act, passed to the Act in 2023, included reforms in how financial statements were filed in the UK and the content of those statements.
The legislation has prompted concerns that the change could allow competitors to “snoop” each other’s margins and undermine the negotiating power of small businesses.
The business group warned that this “regulatory expansion” would force businesses to either force large providers to pay for software or prepare and submit accounts in electronic form using third-party agents, creating additional “costs and turbulence.”
The proposal was created to improve the integrity of corporate housing after various scandals, including shell companies and fraud.
The industrial strategy, released by Reynolds at the end of June, has a goal of reducing corporate deficits by 25% as part of a broader plan to streamline regulations and make operations in the UK “easy and cheaper.”
The Small Business Federation said the plan “sounds like positive news,” saying that the relief for small and medium-sized businesses and company directors “sounds like positive news” “we have to improve our company’s data but don’t want regulatory gold-plated that will undermine them against strong customers who can use that information as weapons against them.”
Companies House said last week it wrote directly to all registered UK companies to give them “enough time” to prepare for the changes.
He said that the transition to software filing is a “critical step” in improving register data accuracy and quality, reducing errors, formatting problems, and speeding up processing times.
At the same time, companies would have been prohibited from submitting a set of financial statements or using certain online systems. These submissions may be rejected and may result in delayed fees or sanctions for the directors.
However, Duncan Hames, policy director at Transparency International UK, said the “rows” on reforms are shortsighted.
“We have learned from painful experiences that laissez-faire approach to corporate law is easily exploited by criminals and corrupt enablers.
“The transparency of frustrating companies at home also risks the UK appear hypocritical as it asks others to open a registry of companies overseas,” he added.
Ray Blake of the Dark Money Files Podcast revealed some of the worse mistakes in corporate housing to provide legitimate data, and he said, “The news disappoints many transparency and anti-financial crime advocates, but we don’t consider this to be one of the most influential measures in the ACT.”
“Unless other reforms are diluted, the ECCTA when fully implemented makes life quite difficult for those seeking to abuse the UK’s founding system.”
The Business and Trade spokesperson said: “This government is committed to avoiding excessive strain on businesses as part of its plan for change.”
Companies House did not immediately respond to requests for comment.
