Consultation proposes sweeping new powers for Companies House
Jennifer Adams reviews the consultation document published last month detailing the intended increase of powers for Companies House and considers the effect the proposals will have on the private limited company and their accountants.
Last month the Department for Business, Energy & Industrial Strategy issued an 80-page consultation document that largely went unnoticed. However, the document states that if all its proposals were implemented it would be the biggest change since “the Register of Companies was created in 1844”.
The consultation states that a “major upgrade” of Companies House systems is needed, and as part of this major transformation the body will seek to develop new responsibilities to verify and investigate the data it receives, assess risks and share intelligence, and strengthen its work with other agencies to ensure “robust enforcement action”.
The proposals will not have the same impact on the day-to-day lives of business as Making Tax Digital, but they will mean amendments to the detail submitted and the powers of Companies House for use of such detail.
Data collection department
Over the years, AccountingWEB members have commented that Companies House is really a data collection department. This document shows that the department intends to move away from its traditional role of accepting information and dealing with inaccuracies only when notified into the role of investigating officer.
The reason for this change of direction is sound enough, being "limiting the risk of fraud and misuse of information”. The digital services used by Companies House will be entirely redesigned but rely heavily on HMRC's Connect computer system and other government systems. The words used in the document are "introducing measures to improve the exchange of intelligence between Companies House, HMRC and UK law enforcement bodies".
One of the reasons the persons with significant control (PSC) register was set up was to increase transparency. However, a review of the register last year found that the PSC incorrectly listed 2,000 persons with significant control who were disqualified directors, 76 who shared names and birthdays with individuals on the US sanctions list, five individuals controlling more than 6,000 companies, and of UK’s four million companies, more than 300,000 claim they don't have or can't find a beneficial owner.
Currently, Companies House does not have the legal powers to check the accuracy of submission but this is being considered. The belief is that by linking with other government computers the potential for misuse will reduce.
Companies House has also confirmed that these new procedures will impact on the fees levied.
Measures of interest
As stated, Companies House does not and has never had the powers to confirm that the personal information provided is accurate. In the consultation, the importance of the verification of persons and the use of AML requirements is stressed.
Particular types of business (including accountants) are required by law to assess the potential risks of illegal intentions for the business relationship. Companies House wants to use that process and will require additional information to be filed when companies use agents to incorporate and on subsequent filings.
Details of the agent’s AML supervisory body and AML registration number will have to be lodged at Companies House. If prospective directors are unable to verify their identity then Companies House intends to refuse to incorporate and possibly impose a penalty for non-compliance. It is intended that all directors and secretaries will have a unique identifier number to be used each time that they are appointed to a company
- Personal information
Currently, Companies House is prohibited from disclosing directors' personal addresses but that is to change such that initially "access would be restricted to Companies House officials" but that this could be extended to law enforcement agencies on a “case by case basis". More information will be required about shareholders at incorporation.
- Risk assessments
Companies House intends to use their system of computer linking to undertake 'risk assessments' to flag up anomalies such as the filing of information that "shows a significant change from its previous status, such as a significant increase in share capital."
- Shortening an accounting period
The use of the workaround of shortening an accounting period and thereby increasing the filing date by up to three months is a practice known to the majority of accountants. Companies House does not mind this, but what is does mind is the multiple use of the practice, which will now be restricted.
- Registered office addresses
Directors have the option of showing a separate service address on the public register, thus keeping their home address private. In future, an application will not be considered where the residential address is a live company’s current registered office address or where the address was the registered office of the company at the time it was dissolved. The question is asked as to whether past registered office addresses should be retained on the register and if so for how long.
In 2017/18 Companies House received over 7,000 applications for a PO Box number to replace the registered office because companies were using other people’s addresses as their registered office addresses without permission. Because of this, it is intended that companies will be required to prove that they have permission to use an address as their registered office. Confirmation that permission had been given for the company to use the agent’s address as the company’s registered office will be required.
Following representations that signatures can be copied from documents on the public register, it is intended that the register be annotated to show that a signature had been provided.
- Number of directorships
As highlighted above, Companies House is concerned that there are directors listed showing as holding large numbers of directorships. The thinking goes that these directors are not really directors of the companies listed, and Companies House is questioning whether there should be a 'cap' on the number of directorships that an individual may hold concurrently.
- Comparing like with like
We all knew it was only a matter of time before Companies House and HMRC would wake up to the fact that sometimes the accounts submitted to Companies House differ from those submitted to HMRC.
A project is currently underway comparing submissions and differences may result in investigations. Companies House gives the reason for the project as being able to look for "evidence of the extent to which the financial information published by Companies House presents an accurate picture of companies’ financial position", but you can be sure that HMRC will be taking an active interest.
- Accountants reporting discrepancies
For those concerned about 'Big Brother', the document confirms that Companies House will be looking to compare data held on other government registers (eg the Register of Births and Deaths and the Office for Professional Body Anti-Money Laundering Supervision).
Importantly for accountants, Companies House is looking to require regulated entities such as banks, accountancy firms and company formation agents to report anomalies to Companies House.
- Overseas bank accounts
Of all the measures, this one is potentially of most concern. The intention is clearly to target money laundering accounts and "misuse of UK registered entities by international criminals and corrupt elites". However, the proposals intend to impose a new filing requirement for a UK company to notify Companies House within 14 days of a non-UK bank account being opened for the company (the name, address of bank and account number).
This will mean that any director of a company opening an EU business bank account, possibly just for visiting abroad, will be required to comply, and such information will be made available to law enforcement on request.
A further concern is contained in the following sentence: "However, there may be a case for some basic information eg the jurisdiction under which the bank account operates, to be made public".
Many of the proposals are relevant and seem necessary on the face of it, but the number of times the words "could be extended to law enforcement agencies" must be a cause for concern.
The closing date of comments on the consultation is 5 August 2019. To have your say email: [email protected], respond online via this link or comment below and AccountingWEB will be making a submission on behalf of its readers.