Small UK companies are currently able to file only their balance sheet with Companies House.

The recent Economic Crime and Corporate Transparency Act, has announced that small UK companies will soon also have to file their profit and loss account.

The exact format is yet to be confirmed, but it will likely be along the lines of total revenue, cost of sales, gross profit, overheads and net profit.

Suppliers, customers, employees, family, friends and nosy neighbours can go onto Companies House and see your total revenue and profit for the year.

Why is this happening?

The idea is that is creates transparency and helps to reduce the fraud that has been prevalent in recent years (covid loans etc).

A set of accounts won’t show funds earmarked for future plans or expected liabilities in the next 12 months.

It won’t show that some revenue may have been a one-off, or that maybe the last year has been exceptionally tough.

It will also be reporting on a timescale that could be 9 months in the past.

People will be making uninformed assumptions, based on incomplete information from Companies House.

In reality, we suspect this information could be used to squeeze small businesses.

Particularly within the food and drink sector, where small producers already come under significant pressure from bigger suppliers and supermarkets to reduce prices.

They may see a profit and feel there is a margin there that can be squeezed further.

They may see a business struggling to break even and feel they need a contract so badly, they can squeeze prices further.

What can you do?

For most people, this may not be a huge concern and you carry on as normal, adding a profit and loss account to your annual filing.

For others, you could make additional disclosures in the accounts, adding some narrative to your annual accounts for anyone reading them.

Having detailed management accounts may be useful if employees, customers or suppliers raise any concerns off the back of reading accounts filed with Companies House.

For some, it might be that the benefits of being a company no longer outweigh the negatives, and changing your business structure makes sense.

I would recommend that anyone considering this option speak to an advisor as soon as possible, before any final decision is made.

The process can be complex and there will be many tax considerations to make, as well as various final submissions required for Companies House and HMRC.

Before setting off down a potentially time consuming and costly path, you want to be sure that it makes both financial and business sense to do so.