SMALL business owners have responded to news that they will be required to file profit and loss accounts with Companies House from April 2028.
One described the announcement as “yet another burden for the smallest of businesses who are already stretched at the best of times”, while another dismissed it as “another layer of admin, lovingly gift-wrapped as transparency”.
Today, the government announced how accounts reforms measures set out in the Economic Crime and Corporate Transparency Act 2023 (ECCT Act 2023) will be implemented.
It will proceed with a number of key accounts reforms, including requiring small companies and micro entities to file profit and loss accounts with Companies House as other companies do, but with the option to opt out of publishing this information on the public register.
It will also require all companies to file their annual accounts via commercial software, remove the option for companies to file abridged accounts and require a strengthened eligibility statement for all companies claiming an audit exemption.
Additionally, it will require component parts of the filed accounts and reports to all be filed together and reduce the number of times a company can shorten its accounting reference period.
April 2028
To give companies more time to prepare, the reforms will now come into effect from April 2028, rather than April 2027. This, the government says, means all companies will have one full accounting year, plus nine months (21 months) to get ready.
It will be contacting all companies via their registered email address to tell them about these changes and signpost available guidance.
Allowing small companies and micro-entities to opt out of publishing their filed profit and loss accounts addresses concerns from the business and investment community around the privacy and commercial risks for smaller companies of disclosing this information.
Details of how smaller companies can opt out of publication of profit and loss will be confirmed in due course.
The government says companies that wish to enjoy the benefits of publication, such as improved access to finance and enhanced transparency, can still do so.
Where a company opts out of publishing its profit and loss accounts, Companies House, law enforcement and HMRC will still have access to help identify and tackle fraud, economic crime and tax evasion.
From April 2028, the government will require all UK registered companies to file their accounts in Inline eXtensible Business Reporting Language (iXBRL) format by using commercial software.
This applies to companies who file their own accounts and those who use third party agents or accountants to file their annual accounts. From this date, our web and paper-based filing systems will be closed for accounts filings.
It will provide a list of software providers on GOV.UK to help companies find a suitable software package.
Reaction
The initial reaction of small and micro business owners was frustration, as they said it would pile more costs, more admin and more time on them in an already difficult economic environment.
Matthew Knight, Chief Freelance Officer at Freelancing.Support, said: “This is yet another burden for the smallest of businesses who are already stretched at the best of times.
“For companies of one, this means taking them away from doing the work, by wrapping them in yet more admin. If small businesses are the backbone of the country, as the Government often tells us, we are piling even more weight upon their shoulders.
“This announcement means not only more admin, but also costs, as businesses need to invest in new software to submit reports, and accountants to help prepare the new statements.”
Equally withering was Steven Mather, Lawyer & Director at Leicester-based Steven Mather Solicitor, who said: “So Companies House is back to wanting every small business owner to bare their profit and loss to the world, but after a collective howl from the business community, now proposes graciously to let you keep it secret. Generous.
“The reform has been watered down so many times since 2023 it is practically homeopathic. You will now need to buy software just to file the accounts you have been filing for free for years. Yet more unnecessary burden on small firms with no material upside to them.”
While conceding there are some pros to the reforms, including “fewer dark corners for fraudsters” and “looking grown-up next to other countries”, Kate Underwood, Founder at Southampton-based Kate Underwood HR and Training, said the cons are the addition of yet more admin on micro businesses and the deadline, which will catch many out despite the extension.
She said: “Here we go again. Another layer of admin, lovingly gift-wrapped as transparency. April 2028 feels miles off. It isn’t. Ring your accountant now, not in the 2027 stampede.”
Zero experience
Small business owner, Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, said the Companies House reforms are “typical of a government populated by people with no experience of running a business“.
He continued: “The reforms make sense in theory but, in practice, represent yet another regulatory burden on already struggling enterprises facing sky-high business taxes since 2024.
“From a bureaucrat’s perspective, mandating commercial software and unified filing will modernise the register, produce accurate machine-readable data, and close loopholes historically exploited by shell companies to mask illicit financial flows.
“But for those at the sharp end, the picture is less rosy. Phasing out free web-filing forces millions of micro-entities to absorb new software costs or hire accountants — a steep learning curve for businesses still running on spreadsheets.”
It’s a view shared by Colette Mason, AI Ethics Consultant at London-based Clever Clogs AI, who said “small businesses will be concerned about the added costs and administrative burden of mandatory software filing and new reporting requirements”.
She also said there will be data protection concerns: “For solopreneurs and owner-managed businesses, the reforms raise important privacy concerns around the collection and storage of essentially sensitive personal financial data.
“Many small business owners operate in competitive markets and value financial confidentiality. As the reforms are implemented, government must work with small businesses to minimise compliance costs, strengthen privacy protections and strike the right balance between transparency and practicality.”
