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.
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.
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.