Companies House Reconsiders Reforms: What the U-Turn Means for Small Businesses

With family structures evolving and financial pressures mounting, succession planning is more important than ever. The government’s pause on Companies House reforms gives small businesses welcome flexibility, allowing families to manage wealth and legacy planning more discreetly—while still preparing for key changes like digital filing and director ID checks.

By announcing a dramatic reversal in its approach to Companies House reforms, the UK government has provided relief to small and micro businesses that were threatened with more onerous reporting requirements.

In the UK, a small business is typically defined as one with fewer than 50 employees and an annual turnover of £15m or less, or a balance sheet total not exceeding £7.5m. A micro business (or micro-entity) is one with 10 or fewer employees, an annual turnover of £1m or less, and a balance sheet of £500,000 or less.

This decision was made following months of concern from business associations, investors, and entrepreneurs who claimed that the proposed changes would have placed needless barriers on the vibrant small business sector in the UK.

Background: The Proposed Changes

The now-shelved reforms, due to take effect from April 2027, would have required small and micro businesses to publicly disclose their profit and loss (P&L) statements for the first time and would have eliminated their current exemptions. Instead of filing the currently allowed abridged accounts, this would have required filing complete accounts including comprehensive income statements. In order to prevent fraud and abuse of UK corporate structures, the Economic Crime and Corporate Transparency Act 2023 included the reforms as part of a larger transparency drive.

Concerns Raised by the Business Community

The proposed rules sparked widespread criticism from founders, investors, and business organisations. Key concerns included:

·         Loss of Commercial Confidentiality: It was believed that making revenues, margins, director compensation, and client concentrations publicly available could be detrimental. Businesses could be undercut by rivals using this information and larger clients could use their understanding of a supplier’s financial situation to bargain for reduced costs.

·         Competitive disadvantage: Some founders expressed concern that the changes would inhibit innovation and deter entrepreneurship, and individuals may choose to incorporate their companies overseas in order to get around the new regulations.

·         Increased Administrative Burden: Small businesses would have had to deal with more complicated filing requirements and external accounting software adoption which would have increased expenses and administrative burden.

The Government’s U-Turn

The government, with the direction of Business Secretary Jonathan Reynolds, has chosen not to move forward with the proposed changes in light of these worries. It will not be necessary for small and micro businesses to use new filing software or submit complete P&L statements as the current exemptions will still apply. This action is part of a larger effort to lessen regulatory burdens and ensure the UK remains an attractive environment for innovation and business growth.

Looking Ahead

Although Companies House will continue to implement other aspects of the Economic Crime and Corporate Transparency Act like improved identity verification and steps to enhance data quality, the government has indicated that it will pursue additional reforms in a phased and proportionate manner. Small companies can rest easy knowing that their opinions have been heard and that needless red tape won’t stand in the way of their expansion and creativity.