Is Companies House rejecting more accounts?

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Jennifer Adams considers whether there has been an increase in the number of accounts being rejected by Companies House and looks at what can be done to ensure that submissions are accepted first time round.

Back in October 2016 the ICAEW revealed that their research had identified a surge in rejections of accounts by Companies House as a result, they said, of 'uncertainty over filing options' now that small companies no longer have the option to submit abbreviated accounts for periods beginning on or after 1 January 2016.

Companies House responded that, according to their statistics, there had been no increase of the rejection rate, which remained static at 2.2%. This statistic was confirmed by Jack Mansfield, head of digital take-up at Companies House, at a recent Companies House talking points webinar. However, 88,000 accounts are rejected every year, some more than once.

Method of submissions

The Companies House annual report 2016 states that the compliance rate for filing of accounts is high at over 99%, with 94.4% of those being filed on time. In excess of 2.7m sets of accounts a year are received in both digital and paper format.

For all its success in digitalising its business, Companies House still handles 1.7m paper documents each year which, according to a Companies House blog, equates to 120 tonnes in weight. Weekly timescales between receipt of paper documents to being logged onscreen can be viewed here.

Online documents are usually processed within 24 hours, paper documents take about a week to process (longer at peak times). As of 2 January 2017 accounts received on 17 December 2016 are being processed. Of course there are many forms that cannot be filed online, but Companies House is working towards full digital filing by 2018/19.

Rejections – paper v electronic submissions

It will come as no surprise to learn that the majority of rejections relate to paper-submitted accounts - 6% compared with 2% for accounts filed via third-party software and 0.3% for web filing. Twenty per cent of accounts are still submitted on paper which, by default, means a higher rejection rate.

Many of these submissions will be by non practitioners but the fact that Companies House felt the need to hold a webinar aimed specifically at agents means that this percentage includes practitioners.

The submission of paper accounts to Companies House was the subject of an AccountingWEB Any Answers question a couple of weeks ago with comments confirming that paper submission is still being used by a number of agents for a variety of reasons.

Reasons for rejection

Filing electronically is not fail safe and there are still some points that need to be checked on submission. As previously mentioned, the rejection rate is lower if using web filing software, and this is partly due to the fact that more types of account can be submitted via this method where validation is built in.

The reasons for rejection (in percentage order) include:

  • Duplicate made up date

The highest number of rejections is for accounts with the same made up date as a previously submitted set of accounts. Accounts can be amended or revised but this can only be done on paper, must be marked ‘amending’ or ‘revised’ as appropriate, and must be for the same period as the original accounts. The original accounts remain on file at Companies House.

  • Incorrect company name and/or company number

The company's name and registration number must be consistent throughout the document and match that which is held on Companies House records (i.e. the name on incorporation). Webfiling will issue a warning if no match is found. Software users need to ensure that the original name is loaded when setting up a client, but the submission will be rejected by the Companies House computer should the name or number be incorrect.

  • Accounting reference date incorrect or missing

The accounting reference date must be the same as the dates given on the public record and be consistent. The date can be changed via WebFiling using form AA01 (LL AA01 for LLPs). Accounts can be prepared with a made up date more than seven days either side of the accounting reference date, but the form must be received before the filing deadline for the specified period has passed. Many rejections are invariably as a result of previous years' accounts being used as a template for the current year's accounts and updating of the date is forgotten.

  • Director's name or signature missing

WebFiling or other software have automated checking which looks for the presence of a 'tagged' name. The signature is provided in the form of the company authentication code which is used instead of a director’s actual signature. Digital submissions will indicate if the name is missing.

With paper accounts a signature and the name of the person signing the accounts must be given at the foot of the balance sheet after any statements. The director or secretary signing on behalf of the board must provide their printed name (signature not required) on the director’s report.

  • Incorrect statements to the accounts

Rejection under this heading is not foolproof under third-party software, which may give the user different options. Details of the new statements can be found in the ICAEW factsheet Filing options under the Small Companies Regime.

Are Companies House being pedantic?

This was a question asked by Blakely, although about a form that can currently only be filed by paper. Regardless, the consensus of members was agreement. Members need to remember the case of Sebry v Companies House 2015, where a blunder by a Companies House employee over a single letter in a name was all that was needed to cause Mr Sebry's company to collapse and cost the government £8.8m in compensation.

In this case Companies House erroneously recorded that the firm had been wound up when it was in fact another, entirely unconnected, company which had been liquidated. By the time Companies House rectified the mistake just three days later, it was too late as Companies House had already sold the name to various credit agencies. As a result the company lost key contracts, supplier credit terms and cash advances from its bank and led to the company filing for its own administration.

AccountingWEB member pstoneman also discovered that non compliance can be costly when a typo resulted in rejection.

Members have posted queries on rejection due to the interchanging use of the words 'Ltd' and 'Limited' and '&' instead of 'and'.

Companies House confirm that using "&" instead of "and" is not acceptable and will result in rejection, but interchangeable use of the words "Ltd" and "Limited' is acceptable, as confirmed in the talking points webinar.

Going forward – relevant points

Whilst publicity has centred on HMRC's Making Tax Digital plans, in comparison Companies House has been quietly getting on with its aim of full digital compliance by the end of 2018/19.

Comments made at the talking points webinar with reference to this aim included:

  • Software providers have been issued with the facility to submit accounts under IFRS, FRS102, FRS102 (1a), and the "filleted format".
  • LLP electronic submission – this facility was made available to software providers in July but is not available on Webfiling as yet. It is apparently on their ‘to do list’, but meanwhile they have been concentrating on ‘filleted format'.
  • CIC submission is currently not possible – again on their 'to do list'.
  • Although Companies House refute the upsurge comment made by ICEAW they do acknowledge that there has been some confusion amongst staff between the difference between abbreviated accounts and 'filleted' post 1 Jan 2016 accounts. In the webinar Companies House suggested that such accounts show the word 'filletted'. This is not a legal requirement, although they said it would assist them in their task.

Further reading:

About Jennifer Adams

Jennifer Adams is Consulting Editor of AccountingWEB and is a professional business author specialising in corporate governance and taxation. She runs her own accounting and consultancy business with offices based in Surrey and Dorset.

Replies

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By Tornado
03rd Jan 2017 13:47

I have not had any Accounts rejected by Companies House for years but I have not submitted any on paper for years so that is probably a testament to the accuracy of using software that uses the correct template and is tagged correctly.

In December I submitted two sets of 'Filleted' Accounts for companies early adopting FRS102 S1a and both accounts were not only accepted, but were on public view within minutes of submission.

For the record I use VT for filing accounts and experience shows that the templates that they supply (and I use) are clearly fit for purpose.

I think there is still an 'old fashioned' approach to filing small company Accounts at Companies House in that at one time, the filed Accounts were regarded as the 'Sales Brochure' of the Company and were full of good news and ambitions. Electronic filing for small companies usually includes just the minimum necessary data and these days the tagged information is fed straight into the CH database ready for selling on to those that are prepared to pay. No need to actually look at the printed word.

You can find much more about a Company these days from an internet search or credit agency than you can from Accounts filed at Companies House which may be made public months after the year has ended and things have moved on.

There is little benefit to filing small Company Accounts on paper now as there is not much useful information in them and it can also indicate that the presenter/company is not that up to date with modern techniques of data communication!

A note to consider is that following Brexit, it may not be required for any Accounts to be filed at Companies House at some stage in the future. An interesting thought. Perhaps the Government will make the information public from the data they collect through Making Tax Digital?

Having said all of that, I think Companies House have done a really good job of bringing in digital services over a period of time, and are a perfect example of how this should be done. The software providers have also had ample time to ensure that their products work correctly.

I think the approach by Companies House is actually a clear example of why mandating Making Tax Digital is wrong and bound to fail.

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to Tornado
03rd Jan 2017 15:14

I am curious as to why you think that Brexit will reduce the amount of information companies are required to make public. Hasn't the lessening in the requirements over the last few decades not been largely driven by EU directives?

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04th Jan 2017 03:14

So anecdotal evidence suggests that the rejection rate has increased, but CH say the rate is static.

Perhaps the question should be: what is classed as a rejection? If I attempt to submit accounts but the authentication code is wrong, I'm not going to even get past the first hurdle, so is this classed as a rejection, or just a failure to submit?

Similarly, if I use software to submit XBRL accounts for a period starting on or after 1 Jan 2016, these will need to be prepared and tagged as FRS 102 accounts. If they are prepared and tagged under FRSSE, they won't get past the initial validation phase of the CH portal, and they will get kicked back in my face immediately. They won't even get processed beyond the initial validation checks and may not even register as a submission. So, does this count as a rejection under CH statistics? I suspect not, since it is not really hitting the CH backend, just being stopped by the bouncer on the front door. But when I receive the rejection message I am probably not going to be able to distinguish between a rejection at the front door or a rejection further along the process (e.g. where the company name is wrong etc).

Given the occasional need to file accounts early and noting that some of the most popular software (e.g. VT, TaxCalc, TaxFiler) only released FRS 102 versions of their accounts production software in the last quarter of 2016, it is possible that there may have been attempts to file FRSSE accounts where FRS 102 accounts were required. In addition, the updated software may have contained bugs that caused further XBRL validation issues at CH, resulting in further rejections.

So ultimately the increase in rejections may just be a temporary blip while the AP software houses get the bugs ironed out - and the "front door" nature of the rejection means that CH may not even register those validation failures as rejections, since the submissions never reach the backend servers.

This is just a guess, but it might explain the disparity between the ICAEW research and the statistics from CH.

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04th Jan 2017 10:32

I have a current problem which qualifies CH as 'pedantic'.

Accounts filed on 30 December using TaxCalc hung around all weekend as "Pending" then were rejected on 3 January. No opportunity to fix the problem in time or even know what was wrong. It APPEARS that the leading zero was missed off the registration number but the replacement filing has been in "Pending limbo" since yesterday so I do not yet know.

Surely it is not beyond the wit of CH programmers to write a routine that looks past this obvious and common error? In my case I think that the zero got chopped off when exporting from the legacy system via Excel into TaxCalc.

I should say that I hold Companies House in the highest regard but we had an issue once before and I expect not to be able to overturn the late filing penalty. In the old days of paper they would send back with a sticker on and give a few days - now it seems to be Sudden Death

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to davidross
11th Jan 2017 10:55

davidross wrote:

...It APPEARS that the leading zero was missed off the registration number...

Surely it is not beyond the wit of CH programmers to write a routine that looks past this obvious and common error?...

Until company number 10000000 was issued last year, dropping the initial zero would not have seen rejections. Having had the clock tick over from 0 to 1, I guess they must now have the full 8 digit reference and so it isn't suite so pedantic.

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04th Jan 2017 11:32

I'm with Tornado. I can't actually remember the last time I had accounts rejected using VT (go on say it - senility setting in).

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04th Jan 2017 11:34

Companies House have neither done too well with their online Web Filing Service.

There have been instances in which I have tried to file my Accounts online, only to be presented with 'Coding Errors' via their online filing system, and they have 'admitted' to knowing of these problems with their Web Filing Service. A Companies House Advisor then had to file the Accounts for me themselves.

Come the next year; still the same issue, although their IT Department were supposed to correct such.

If Companies House require businesses to use their online service as opposed to paper filing, then I suggest they get their act together, instead of charging Companies 'late filing fees' (which eventually were removed); for their OWN errors!

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04th Jan 2017 11:34

Companies House have neither done too well with their online Web Filing Service.

There have been instances in which I have tried to file my Accounts online, only to be presented with 'Coding Errors' via their online filing system, and they have 'admitted' to knowing of these problems with their Web Filing Service. A Companies House Advisor then had to file the Accounts for me themselves.

Come the next year; still the same issue, although their IT Department were supposed to correct such.

If Companies House require businesses to use their online service as opposed to paper filing, then I suggest they get their act together, instead of charging Companies 'late filing fees' (which eventually were removed); for their OWN errors!

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04th Jan 2017 11:45

I have not have any Accounts rejected by Companies house, I like to send in signed paper accounts, but it takes around 20 days for them to be available for online public viewing.

The wait can worry you, especially when a deadline is looming.

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By Tornado
04th Jan 2017 13:52

I feel the need to state the obvious here that Accounts that have been prepared properly and in accordance with legislation will generally not get rejected when filed.

Using well prepared templates from dependable software suppliers for electronic filing is an almost foolproof way to ensure that Accounts are in the right format, tagged correctly and complete.

Also note that there are no original signatures required on electronically filed accounts so although it is more secure to have signed original Accounts in your possession before filing, all that is required to make the electronic filing is evidence that the Accounts have been signed and the date of signing.

You can also use the same template to prepare tagged Accounts to submit with the Company Tax Return.

Getting the name of the Company right on documents is important. Note that Companies formed with the full 'Limited' in their name are allowed to use 'Limited' or 'Ltd' in official documents but companies formed with just 'Ltd' in their name can only use that wording and cannot use 'Limited' instead. Most of the Companies I deal with have the full title so I have not had the opportunity to test this when filing so it may be OK, but that is the rule.

One final observation from Accountancy Magazine today from the Editor's Letter puzzles me a bit where it is stated that "the Government under-estimated the number of Companies eligible to file abridged accounts. The original estimate of 11,000 was well off the mark with 1.9m companies filing accounts of this type in 2015/16."

That makes no sense to me but there seems to be an underlying suggestion that the Government are rubbish at their official estimates.

Still, at least we know that this will not happen with Making Tax Digital where everything is well thought out and hunky dory.

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to Tornado
04th Jan 2017 14:39

"That makes no sense to me but there seems to be an underlying suggestion that the Government are rubbish at their official estimates". Really Tornado, are you really sure that that is the case. Government getting their estimates and figures wrong. You have to wonder on what Government base their "estimates". There's an advert where the assistant uses a very dubious method to ascertain the height of a customer. Perhaps Government use a similar method.

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04th Jan 2017 16:36

We've only had one set rejected - someone didn't refresh VT's auto-hide after entering the stock figure and so the balance sheet didn't add up *red face*. (Mind you, they got their own rejection letter wrong, citing the wrong figures on the balance sheet.)

Lesson learnt, but one annoying aspect was that CH, while so keen to go digital (and doing pretty well at it IMO) still insisted on the correct accounts being presented on paper. If even the tech troglodytes at HMRC allow re-submission online, why not CH?

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04th Jan 2017 17:47

We have had accounts rejected incorrectly for the following reasons:
1) No "Balance Sheet" - we pointed out that a "Statement of Financial Position" under IFRS met this requirement
2) No "Company Balance Sheet" - they were unable to read the table of contents which did have the Company Balance Sheet later in the Group accounts
3) Company Registration Number was "not shown" even though it was shown in the Directors Report, the Company Balance Sheet and Company Information page - no explanation received as to why was originally rejected
4) Companies House can't find the exemption to S479 in the Group Accounts, even though we write a cover letter saying where this is, but they throw away the cover letter and then reject our accounts - this has happened 3 years in a row now!
and there have been others in the past.....
Do we get any compensation for our wasted time, having to explain and train Companies House staff who appear to be following a check box approach without a proper understanding of accounts - nope. Still we have had some nice letters of apology.

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By Arm266
04th Jan 2017 20:15

I note David Ross's comment about the leading zero's on the Companies House number. I think Companies House need to get their own house in order as my Certificate of Incorporation has the leading zero missing from the certificate!!

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05th Jan 2017 07:54

We have had some paper FRS 102 1A filleted accounts rejected because they did not include the auditor's report just the new short statement note in the IRIS format. Several other sets in the same group submitted with them were accepted without question. The rejection letter went to the client and this caused an adverse client comment. The "defective" accounts were resubmitted without alteration and an explanation sought. No response was received and these were accepted. We have not had any serious problems since although some paper accounts were rejected because they were signed in blue ink not black. Online filing is the best option where possible especially if it is close to filing deadline

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11th Jan 2017 11:03

Considering what many of us experience when taking on new clients, perhaps CH should be rejecting more often.

There are myriad examples of accounts with the wrong FRSSE or negative balance sheets with no going concern note or simple errors of reporting. A lot of this is down to blind trust in the software 'getting it right' rather than the preparer having the knowledge to know it is wrong or omitting something.

Knowing the disclosure requirements, what year's standards and such is a part of doing a professional job. If you don't know enough, you shouldn't be charging people for it - you wouldn't expect a 30something sales assistant to have a go at flying your holiday plane, so why do those who hold themselves out as accountants 'fly' the accounts prep for others?

On a similar vein, how many people can still work out whether the payroll software churns out the correct numbers and do you ever check?

Accountants in practice ARE SUPPOSED TO BE PEDANTIC!!!

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