Accountants urge rethink on P&L accounts proposal
Accountants across the profession urged the government to reconsider its plan to broaden the amount of sensitive financial information filed at Companies House.
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At last, ICAEW does something useful.
The P&L achieves nothing on a set of micro accounts
All Micro accounts do is show whether the company is insolvent at the date shown on balance sheet.
The state already has all it needs submitted to HMRC
Lenders have the option to ask for the exact details they want
Why should a tiny company need to put its income figures on public record for everyone and their dogs to read?
At least a requirement to file a P&L w0uld discourage sole traders from incorporating when they don't really need to.
There is probably more dubious activity on self employed accounts than on Micro company accounts.
If this is meant to be about control and anticrime then better more activity is exposed to controls than less activity as a direct result of the pointless P &L
A huge improvement would be to only allow approved qualified professionals to upload information on Companies house. Too many business owners and unqualified outfits uploading accounts (and other information) from cloud based software, with limited understanding or care.
ACCA and ICAEW should stand up for the profession and make the qualification more prestigious by working along side the government to allow only qualified professional to submit information to both CH and HMRC.
I another jurisdiction I worked in CH accounts could only be prepared and submitted by accountants registered with a recognised Institute.
Submissions to their HMRC equivalent could only be submitted by a registered agent not necessarily an accountant or a member of a professional body. However whomever submitted had to show competence in tax (although a low level) to be registered with their HMRC equivalent.
The proposal to publish the P&L is, like so many laws and regulations these days, about Being Seen To Do Something ... regardless of whether it actually achieves its intention. (See also a good proportion of all those pandemic regulations which were clearly only for appearances).
As I commented on the webinar it really should be up to Companies House to perform due diligence on those wishing to incorporate a limited company. The proposed registration of agents is yet another layer of responsibilty to be foisted on us. The saying used to be that auditors are watchdogs not bloodhounds. I did not sign up to be an intelligence officer or policeman. Anyone wishing to open a bank account has to jump through hoops (quite correctly) at the instigation of banks. Why cannot the government agencies take on their responsibility in a similar fashion?
They need to accept that for any of these new rules or laws to mean anything, companies house would need to take some responsibility for doing the absolute bare minimum enforcement of existing policies. I feel like a bit of a mug going to the effort to do things properly when I know for a fact that I could put any nonsense on the company register and companies house would accept it.
Exact same issue with the "People with significant control" change, which was supposed to be an anti money laundering measure. This government loves a headline but is not willing to build genuine support and infrastructure behind any of their policies.
LOL the usual rubbish from our corrupt government who are very keen on squeezing the small fish like us daily whilst the big boys in Parliament, their cronies and the big Audit firms totally ignore AML rules and bypass them. When will people open their eyes and realise that this government is only ensuring the enslavement of those of us who choose to follow their crappy laws. The rich and famous ALWAYS get a free pass as usual.
I don't understand most of the comments on here. If people want the privilege of limited liability (ie permission to rip off your creditors) then they should be willing to say how profitable or not they are.
You only need a BS to see if a company is a credit risk.
I can normally figure out if a company is profitable from the balance sheet and notes.
I agree GDavidson. This was once how filing worked and it should be again. Micro companies can have turnover of £632k and yet give zero info on their profitability and be protected against creditors. Many of the arguments made would apply equally to Balance Sheets. "9m is too long to be useful" "non-accountants can't read accounts anyway" "Might raise awkward questions about losses"" "HMRC have the info anyway". But nobody say we shouldn’t publish a balance sheet.
When I worked abroad the requirement for operating a limited liability company was £50,000 hard cash input into share capital - a case of put up or shut up; other rules in accordance with UK Companies Act. Most non-accountants cannot read a balance sheet filed with Companies House correctly as there is a lot more going on behind the simplistic format required so a P&L would only further confuse
I agree GDavidson. This was once how filing worked and it should be again. Micro companies can have turnover of £632k and yet give zero info on their profitability and be protected against creditors. Many of the arguments made would apply equally to Balance Sheets. "9m is too long to be useful" "non-accountants can't read accounts anyway" "Might raise awkward questions about losses"" "HMRC have the info anyway". But nobody say we shouldn’t publish a balance sheet.
Filing the P7L account will serve no purpose but to disclose to competitors how profitable a company is. That seems to be unreasonable to me - people are entitled to a certain amount of confidentiality. The Government isn't too keen on exposing its activities and how it wastes our money on useless civil servants and incompetent HMRC and like organizations.
Companies House doesn't understand what it gets as some of the accounts they hold on file are utter rubbish but fail to put a 0 on a form they will spot immediately.
the point in the discussions which took place before micro and B/Sheet only filing was introduced is:
with micro companies it is easy for large customers to pressure, and they did so do, one or two man businesses over trade terms.
Fat Contractor Ltd can see from the account the extent Tiny Tim depends on him and squeeze the supplier.
It is simple and it happened regularly. (I started in accountancy in 1961). It was in fact as much a bullying element as the scourge of late payment.
On a number of occasions I watched it cause misery.
Logically, HMRC which has has access to the figures, and expertise in this matter, is the first port of call when investigating perceived general naughtiness in accounts.
to add another unwanted layer to the UK civil service cake, when said service is unable to do that which it is already authorised to do, is barmy.
I remember when all limited companies had to file audited accounts with P&L, Balance Sheet and notes. It was never a major problem for the business (just a nuisance being checked on and an additional expense) and good work for accountants. If a business wants limited liability then anyone doing or intending to do business with it should be able to see what profit it makes, how it makes it and what it does with it. They should also be able to see who controls it on a day to day basis, i.e. the directors. There is no compulsion for a business to incorporate. If the business owners want secrecy, they can be sole traders or partnerships.
It would appear that Government/HMRC have decided to do away with making things simple (3 line accounts) and will now begin to want the most detailed of information via CH and MTD. Good luck with that.
Petestar1969 & FrankUW
1)
Often the reason for having a sole trader incorporate are: Tax with Ni does not have to be paid until one knows what the actual liability is. A major consideration in variable trades.
2)
It puts a fence between the person and, often, the larger organisation being dealt with.
FrankUW
Sadly the whole trend of Govt action has been to make filing, computation, all sorts, "User Friendly"
Actually this means, passing work previously done by the Civil Service, over to the taxpayer.
Hence the ultimate fiction that fees for ITR cannot be claimed as an expense by the taxpayer, because the Return is designed for the taxpayer to Do-it-yourself.
To do as you suggest would negate this whole Treasury inspired fib.
Folks understandably criticise CH for accepting any old rubbish. The white paper says
Companies House will no longer be a passive administrator of company information but will become a much more active gatekeeper over company creation and custodian of more reliable information on the register.
We can quite justifiably ask whether CH will have the resources and capability to do this but the intention is clearly there.
I'm just wondering (only wondering) if Companies House will be taking over the MTD part of non VAT registered business. This will mean that HMRC are seriously thinking about QU for the smaller business.
" If people want the privilege of limited liability (ie permission to rip off your creditors) then they should be willing to say how profitable or not they are."
says GDavison,
but do filed accounts, for any organisation, actually do that, no, they only indicate how profitable they WERE, over the last two years, how many perfectly profitable businesses have been toasted by enforced closure for protracted periods? Making current decsions soleley on the strength of filed accounts is akin to driving by solely looking in the rear view mirror.
So let's not have a Balance Sheet then? It's just as out of date. Perhaps we shouldn't file anything at all, and have limited liability to anybody that wants it?
Feels like painting a fortification a pretty colour when the enemy already have a motorway sized tunnel under the wall
The man steering the country and the man holding his handbag have just been fined for breaking their own bloody laws.
If those two cXXXwombles, agree to publish all their own personal financial information in the daily rag, I will publish my full accounts and peg all my dirty laundry up and down the street like bunting.
Until then nlnn .