Key considerations as Companies House and HMRC digital transformation continues

Key considerations as Companies House and HMRC digital transformation continues

Mar 28, 2024

This month sees the start of a new era of digitisation for Companies House, Ifty Nasir, founder and CEO of Vestd, explains what this means for businesses

We’ve seen conversations step up over the last year on what the long-awaited move towards increased digitisation by HMRC and Companies House indicates for businesses.

While a move to digital-only filings with Companies House won’t have a huge impact on most businesses, (65% are already compliant with digital reporting), the move may have more of a bearing for wider company secretarial responsibilities.

Keeping pace with legislative changes

The move to digital filings comes from the Economic Crime and Corporate Transparency Bill, which received Royal Assent in October 2023. This new legislation gives Companies House the power to mandate how businesses file their accounts, to improve transparency, accuracy, and trusted information on its registers.

As part of the legislation, from March 2024 all companies must confirm their activities will be above board with a statement of lawful purpose upon incorporation, and on their annual confirmation statement at least once per year.

Software-only filing is to be phased in over the next two to three years depending on company structure and filing schedule, with all companies required to conform by April 2027.

It’s clear that with the new legislation, alongside HMRC’s Making Tax Digital campaign to get taxpayers to provide quarterly income data through third-party software, Companies House is on a digitisation drive.

Before long all company secretarial and equity management will follow suit, where those who have embraced digitisation will have the upper hand. The roadmap to a fully digital Companies House is a consideration that many CoSec providers will need to be ahead of to ensure they are prepared for any future changes.

Wider benefits

Moving towards software-based filings might seem like another regulatory hoop for businesses to jump through, distracting time from more valuable activity.

It’s true that new legislation raises questions around compliance, but done properly, digitisation has the power to go beyond regulations and be transformative for businesses.

At a broader level, digital formats make company data easier for regulators and investors to assess, as well as removing human error from the process. Standardised digital documents will also boost fraud detection, exposing suspicious filing patterns.

All of these changes are valuable benefits and, for businesses themselves, greater accuracy, efficiency and adaptability will help to streamline processes and cut out some of the laborious manual tasks associated with paper or web-based filing.

Simplifying equity management

Company secretarial and equity management may be next in line for digitisation by Companies House and HMRC; if that happens, there are some important steps businesses can take to get ahead of the changes.

Company secretaries have broad roles – the role is often filled by an accountant or even by founders or managing directors. This means that the legal obligation, under the Company’s Act, to update Companies House with any changes to your equity, can be victim to inconsistencies.

Without the right tools in place, this can bring additional paperwork and administration. Not only is much of the administration a legal requirement, but it can make a huge impact on the growth of a business.

Whether it’s managing shareholder information, updating people with Significant Control (PSCs) or maintaining an accurate cap table, there are already digital tools available with Companies House integration to take care of any additional admin.

Not only does increased digitisation reduce the mountain of paperwork building up with accountants, ensuring accuracy and transparency could be vital to attract the investment that will take a business to the next stage of its growth.

Equity management is an important administrative and legal consideration, but it doesn’t need to be difficult. Whatever is next on the roadmap to full digitisation at HMRC and Companies House, it’s vital that accountants and businesses avoid chasing compliance to keep pace with new legislation.

The move to software-only filings is just one example where getting ahead of regulations will have paid off for many businesses, which have already seen the benefits.