Amanda Brockwell, partner in the corporate team at Paris Smith solicitors, comments on the new anti-fraud measures.
Greater transparency and anti-fraud measures are going to be introduced in changes to processes at Companies House. According to a white paper published at the end of last month, Companies House is set to change from a 'passive administrator to more active gatekeeper' as part of the government’s crackdown on the laundering of overseas dirty money.
Businesses will no longer be able to provide differing versions of their financial position to Companies House and HMRC under these proposed reforms, which come at a cost of £83 million.
Under the reforms:
The white paper lists well-known loopholes. It notes that parties based overseas and not subject to UK money laundering regulations are permitted to form UK companies and that it is possible to register an appointment without the knowledge or consent of the person being registered. To date it’s also possible to find that a company has claimed a stronger financial position in its Companies House filings in order to impress stakeholders, whilst starting a less strong position in its returns to HMRC in order to reduce its tax liability. That will all end.
Current controls on phoenix trading (where a business transfers its assets but not its debts to a company with a similar name and common directors) apply only if misconduct is identified under the insolvency regulations. However, under the changes, 'the vast majority of individuals incorporating or filing with Companies House' will have to verify their identities with official documents checked against the holder’s biometrics. If an individual fails to verify, this will be noted on the public register, enabling anyone contemplating doing business with them to make their own assessment of risk.
In addition, all small companies will be required to file a profit and loss account - and all accounts filed with Companies House will have to be in a digital format using the industry standard iXBRL mark-up language to make them machine-readable.