New Act strengthens Companies House anti-fraud powers

The Economic Crime and Corporate Transparency Act, which gained Royal Assent last week, includes measures to help Companies House close loopholes on identity verification for all new and existing registered company directors and people with significant control, including overseas entities.

The measures set out in the Economic Crime and Corporate Transparency Act will give Companies House new and enhanced powers to improve the quality and reliability of its data which its chief executive, Louise Smyth calls, "One of the most significant moments for Companies House in our long history."

A major change will be requiring Small companies and micro-entities to file a profit and loss account, with Small companies having to also file a director’s report. Companies will no longer be able to file abridged accounts. A timetable has not yet been set out for this change and will be included in secondary legislation in due course. 

The Act has introduced four new objectives for the Registrar of Companies for England and Wales.

1. To ensure that anyone who is required to deliver a document to the registrar does so (and that the requirements for proper delivery are complied with).
2. To ensure information contained in the register is accurate and that the register contains everything it should contain.
3. To ensure that Records kept by the registrar do not create a false or misleading impression to members of the public.
4. To prevent companies and others from carrying out unlawful activities, or facilitating others to carry out unlawful activities.

In order to achieve these objectives the act includes the following measures:

• Introducing identity verification for all new and existing registered company directors, Persons with Significant Control, and those who file on behalf of companies.
• Broadening powers to become a more active gatekeeper over company creation and a custodian of more reliable data.
• Improving the financial information on the register so that it is more reliable and accurate, reflects the latest advancements in digital technology and enables better business decisions.
• Providing Companies House with more effective investigation and enforcement powers, and increasing our ability to share relevant information with partners including the National Crime Agency’s Financial Intelligence Unit. 
• Enhancing the protection of personal information to protect individuals from fraud and other harms.

Some of the measures in the act, such as identity verification, will not be introduced straight away but should come into force in early 2024.

Companies House warns that early measures will be introduced:

• Greater powers to query information. This means scrutinising and rejecting information that seems incorrect or inconsistent with information already on the register. In some cases, they will be able to remove information.
• Stronger checks on company names.
• New rules for registered office addresses will mean all companies must have an appropriate address at all times. Companies will not be able to use a PO Box as their registered office address.
• A requirement for all companies to supply a registered email address.
• A requirement for all companies to confirm they are forming the company for a lawful purpose when they incorporate. Every year, the company will need to confirm, on its confirmation statement, that its future activities will be lawful. 
• Annotations on the register to let users know about potential issues with the information that has been supplied to Companies House.
• Taking steps to clean up the register, using data matching to identify and remove inaccurate information.
• Sharing data with other government departments and law enforcement agencies.

The Chartered Institute of Taxation (CIOT) has welcomed the new powers, in particular the closure of the loophole on Overseas entities. Up until now, legislation has required the identification only of the Beneficial owners of land or property, for example. However, this has failed due to overseas companies acting as nominees on behalf of a client and obscuring the true identities of the owners. 

The government introduced an amendment to address this by inserting a new definition of beneficial ownership into the 2022 Act.

Changes to fees

As a result of the new legislation Companies House will increase some of its fees from early 2024 as they are set on a cost recovery basis. This means fees must cover the cost of the services delivered.

Useful guides on this topic

Register of Persons with Significant Control (subscriber version)
What is the Register of Persons with Significant Control (PSC)? Who must complete it? Who is a Person with Significant Control? What details must be included on the Register?

Registration of Overseas Entities: Agent Guide
Registration of Overseas Entities: How to register an Overseas Entity that owns, buys or sells UK property. A detailed guide for Overseas Entities and their UK Agents.

Register of Overseas Entities
Freeview guide: Overseas owners of UK property to register and report their beneficial ownership to Companies House when they own, buy or sell UK property.

AML Zone
Anti-Money Laundering Zone: resources for accountants 

AML: Record Keeping
Anti-Money Laundering: what records should you request and retain?

External links 

Companies House: Changes to UK company law: a big moment for Companies House