Companies House is clamping down on secretarial matters. Is your business ready?

The Economic Crime and Corporate Transparency Act, which became law in October 2023, has created a raft of new measures affecting companies and their directors.
It has given Companies House significant new powers to investigate both new and existing companies.

And there are also new rules coming into effect in March that businesses and their directors need to be fully aware of.

The new powers include:

• greater powers to query information and request supporting evidence
• stronger checks on company names
• 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, and to confirm its intended future activities will be lawful on their confirmation statement
• the ability to annotate the register when information appears confusing or misleading
• 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

Registered Office Requirements

From March 4, 2024, there will be new rules for registered office addresses which mean companies must always have an ‘appropriate address’ as their registered office. An appropriate address is one where:

• any documents sent to the registered office should be expected to come to the attention of a person acting on behalf of the company
• any documents sent to that address can be recorded by an acknowledgement of delivery

These changes mean companies will not be able to use a PO Box as their registered office address from March 4.

Many companies have used PO Box addresses as an alternative to using their own home as the registered office to avoid unwanted visitor and unsolicited mail.

Companies can still use a third-party agent’s address if they meet the conditions for an appropriate address. But those that do not have an appropriate registered office address could be struck off the register.

And if Companies House identifies an inappropriate registered office address, it has the power to change it to a default address held at Companies House.

The company must then provide an appropriate address, with evidence of a link to that address, within 28 days. If evidence of the new appropriate address is not delivered, Companies House will start the process to strike the company off the register.

WNJ’s office at Chandler House, Riversway, Preston, has been used as the registered office for many clients for some time as it helps expediate the correspondence with Companies House and other authorities such as HMRC.

WNJ can also assist in changing the Registered Office as part of its various company secretarial services.

Registered email address

Also from March 4, there will be a new requirement for all companies to give a registered email address to Companies House. This email address will not be published on the public register.

New companies will need to give a registered email address when they incorporate. Existing companies will need to give a registered email address when they file their next confirmation statement with a statement date from March 5, 2024.

Companies House online services will prompt to supply a registered email address when filing the company’s next eligible confirmation statement.

Companies House will the use this email address to communicate with companies, so it’s important to choose an appropriate email address.

You can register the same email address for more than one company, but it is recommended to select an address that is secure, and not used for personal matters.

Companies can change the registered email address through an ‘update a registered email address’ service using the company’s authentication code.

Companies will have a duty to maintain an appropriate registered email address, in the same way as their registered office address. Any company that does not do this will be committing an offence.

Statement of lawful purpose

When new companies incorporate from March 4, 2024, the subscribers (shareholders) will need to confirm they are forming the company for a lawful purpose.

It is a requirement to confirm the company’s intended future activities are lawful on the confirmation statement.

The intention of these new statements is to make it clear that all companies on the register, new and existing, have a duty to operate in a lawful way. Companies House may take action against your company if it receives information that confirms that the company is not operating lawfully.

Companies House will not accept your documents if these statements have not been confirmed.

Existing companies will need to make a lawful purpose statement when they file their next confirmation statement with a statement date from March 4, 2024. Once again, WNJ can assist in filing the lawful purpose statement.

Companies House has also announced changes to its fees for matters such as Incorporation, filing of Confirmation Statements, Changes of Name Registration, and Striking Off – with fees in most cases more than doubling and in some cases quadrupling.

This is part of its determination, alongside the government, to tighten up compliance issues and ensure it has the resources to perform rigorous checks.

And it is not just Companies House that is clamping down on businesses that do not appear to be fulfilling their legal obligations regarding company secretarial matters.

It has been reported this month that company shareholder and directors suspected of earning dividends without declaring their taxable income are being contacted by HMRC.

HMRC has been investigating company reserves and identifying companies that have made a profit but have depleted reserves, alluding to a dividend payment.

It has indicated that many shareholders and company directors have drawn funds from their companies without the correct procedures to declare the dividends.

Companies must properly document dividends to be compliant with HMRC and company law.

Dividend documents include board meeting minutes, a register of dividends and a dividend voucher for each shareholder.

If a payment does NOT comply with Companies Act requirements for dividends, then HMRC can deem it is not a dividend, but a salary or a loan. This may have many unforeseen tax consequences leading to increased liabilities and potential further investigation.

In the latest letter campaign, HMRC has been writing to company owners informing them that they may need to declare dividend income.

They are being given the option to disclose information on any dividends that have not been declared or inform HMRC if they believe there is nothing more to declare.

Taxpayers will be given 30 days to notify HMRC if there is nothing to declare. This is far easier to manage and prove if the company has complied with the law and has signed documentation to hand.

Penalties charged can be as much as the same amount of tax due if wrong amounts have been submitted, plus interest charged per day for any late payments.

WNJ has invested in company secretarial software and implemented training procedures to ensure that both matters relating to Companies House and HMRC compliance are adhered to so that client companies can concentrate on what they do best, safe in the knowledge that such matters are dealt with.

Amongst WNJ’s various but sometimes less understood services is the company secretarial support that we offer clients.

In its simplest form, this means assisting the directors of a company ensure that they fulfil their statutory duty to ensure the statutory records of the company are kept up to date, and if there are no changes to shareholdings, directors’ details or the registered office details then the filing the annual Confirmation Statement each year is relatively straightforward.

WNJ can continue to support you with the following service packages:

• Bronze – Registered Office, Registered Email, Assistance with Lawful Purpose Statements and filing of annual Compliance Statements: from £150 plus VAT.

• Silver – as above but also maintenance of statutory records, including share records, dividend documentation including recording minutes, producing dividend vouchers and entering into dividend registers, informing Companies House of any significant changes in the company’s structure or management, for example the appointment or resignation of directors: from £350 plus VAT.

• Gold – as silver but also include non-executive directorship, arranging meetings of the directors and the shareholders. This responsibility will involve the issue of proper notices of meetings, preparation of agenda, circulation of relevant papers and taking and producing minutes to record the business transacted at the meetings and the decisions taken. Compliance with data protection and human resource requirements (we usually refer our client to associated firms of specialist advisors): from £995 plus VAT.

• To discuss any of the issues raised here and how WNJ can assist you please contact me on 01772 430000

VAT investigations on the rise

HM Revenue and Customs (HMRC) increased its scrutiny of VAT avoidance in 2022-23 according to recent reports, with tax investigations into mid-sized businesses on the rise.

The Financial Times has reported that the tax body opened up 23 per cent more VAT cases than in the previous year.

The number rose from 88,673 to almost 110,000 as HMRC stepped up its efforts to maximise tax revenues.

These new figures were revealed following a Freedom of Information (FOI) request from content and technology company Thomson Reuters. VAT makes up roughly 20 per cent of the UK’s total tax take.

The FOI response showed that in the past year HMRC focused primarily on wealthy individuals and mid-sized businesses, with the number of interventions targeting this group rising by 60 per cent – from 3,253 cases in 2021-22 to 5,203 in 2022-23.

The report compiled following the FOI information also showed that increased compliance measures had yielded £11.4bn in unpaid tax.

However, it revealed that the ‘tax gap’ between what HMRC estimated it is owed in VAT and what it collected was greater last year than the year before.

It stood at £8.8bn in the 2022-2023 tax year, up from £7.6bn in 2021-2022, bucking what had been a downward trend.

The Financial Times carried a statement from HMRC which said: “We have introduced legislation and enhanced requirements for online reporting and registration which are helping to reduce error, avoidance and evasion.

“We continue to work with customers, agents, trade and representative bodies to provide tax education and guidance, resulting in preventive measures which ensure tax is correctly accounted for without the need for further intervention.”

• To discuss any issues raised by this article, or any tax issues, please contact me on 01772 430000

Flexible working requests: Are you prepared for changes?

New working regulations will come into effect in April this year giving employees the right to request flexible working from day one of their employment.

Under the current law, workers have to have been employed for at least 26 weeks before making a request to work flexibly.

However, The Flexible Working (Amendment) Regulations 2023, laid before Parliament last December, will apply to applications made on or after April 6, 2024.

‘Flexible working’ is a wide-ranging phrase. It can refer to working patterns or hours, including part time, flexi-time, term time, compressed hours and adjusting start and finish times.

And it can also be the subject of employment location, such as working from home.

The new working regulations are part of wider changes also expected to come into force in April.

The new Act will require employers to consult with the employee when they make a flexible working request before rejecting it.

And the time employers have to respond to a request will be reduced to two months, from the three months allowed under current rules.

Employees will also be able to make two requests within a 12-month period, compared to the single request they are currently allowed.

And there will no longer be any requirement for an employee to explain what effect their request will have on the employer or how the impact might be dealt with.

HR experts say businesses should be prepared to see a rise in requests for flexible working and should review their current policies in advance of the new regulations coming into effect.

That includes putting in place effective processes to review and respond to applications promptly.

The advisory body Acas says it is currently producing a new statutory Code of Practice on handling requests for flexible working, to support employers and employees through the changes.

Chief executive Susan Clews said: “It is important for bosses and staff to be prepared for new changes to the law around the right to request flexible working.”

The code will include information on the need for transparency about reasons for rejecting a request.

It will also make it clear that employers should proactively offer an appeal where a request has been rejected.

• To discuss any issues raised in this article please contact me on 01772 430000

The year ahead – be aware of tax changes

As we start 2024 it is timely to look at some upcoming tax changes and what they may mean to you.

National Insurance

Class 2 National Insurance contributions will be abolished from April 2024.

And at the same time, the main Class 4 National Insurance contribution rate is being reduced from nine to eight per cent for the 2024-25 tax year.

Class 4 NICs will continue to be calculated at two per cent on profits over £50,270.

Class 2 NICs currently provide self-employed people with access to a range of state benefits, including the state pension.

From April 2024, if you are self-employed with annual profits above £12,570 you will continue to receive access to the benefits.

Those with profits between £6,725 and £12,570 will continue to receive access to the benefits, via a National Insurance credit.

And if your profit is under £6,752 or you are making a loss, you will be able to continue to pay Class 2 NICs on a voluntary basis in order to maintain access to state benefits.

Small business profit reporting

From the 2024-25 tax year, ‘basis period reform’ will require businesses to report their profit or loss that arises within a tax year – regardless of their accounting date.

The move means that businesses with accounting dates that don’t align with the end of the tax year will no longer have overlapping basis periods.

Under the current system, tax returns filed by the self-employed, sole traders and partnerships are based on a business’s set of accounts ending in the tax year (April 5).

More complex rules apply when a business starts and draws up its accounts to a date different to the end of the tax year. HMRC says those rules can be confusing, particularly for new businesses, leading to thousands of errors and mistakes in tax returns – and that is why the system is changing.

The Treasury says this will lead to ‘fairer outcomes’ between identical businesses that have different accounting dates.

As businesses transition to this new reporting process for the tax year 2023-24, some could face higher than expected bills, as a result of having more than 12 months’ profits taken into account.

Overlap relief should be included in 2023-24 tax returns if the changes mean there are overlapping basis periods.

If you are self-employed will be able to spread any extra tax due on January 31, 2025 across the next five tax years.

Online selling

It has been described as a ‘side hustle tax’ – targeting people who sell second-hand goods online, let out their spare rooms or deliver takeaways.

From January 1 2024, digital platforms have been required to collect and report seller information and income to HMRC. These platforms must report sellers’ income by January 2025.

The move applies to marketplaces such as eBay, Airbnb and Etsy. And it is targeted at those who earn more than £1,000 a year through online transactions.

Once a seller exceeds this threshold, they must register as self-employed and file a tax return at the end of the year.

Platforms that fail to comply with the new reporting rules, which include bank account details and the number of transactions made by each user, face large fines and other possible penalties.

The changes are a result of an internationally agreed set of rules requiring digital platforms to report certain information to HMRC.

Earnings of less than £1,000 in one tax year are not considered taxable income. So, you won’t need to register as self-employed or declare this income to the taxman.

• To discuss any issues raised by this article please get in touch on 01772 430000

Self-assessment: The countdown is on

With less than a month to go to the self-assessment deadline HM Revenue and Customs (HMRC) has revealed almost six million people have yet to file their return for the 2022-23 tax year.

The deadline to file a return and also to pay any tax owed is January 31, 2024. And as Myrtle Lloyd, HMRC’s director general for customer services, says: “The clock is ticking.”

Official figures show that almost 6.5 million people have beaten the clock and have filed – including 49,317 customers who used the New Year holiday to get a head start on their tax obligations.

According to the data, 25,769 people submitted their self-assessment tax returns over Christmas Eve, Christmas Day and Boxing Day. Another 25,593 taxpayers filed their returns online on New Year’s Eve.

HMRC has a wide range of resources online, including help on the GOV.UK website, to support people to complete their tax return.

The quickest and easiest way people can pay their tax bill is via HMRC’s app which is free and secure. Information about the different ways to pay, can also be found on GOV.UK.

People who are unable to pay in full can access support and advice on GOV.UK. HMRC may be able to help by arranging an affordable payment plan, known as ‘Time to Pay’ for those who owe less than £30,000.

HMRC will consider the reasons for not being able to meet the deadline. Those who provide HMRC with a reasonable excuse may avoid a penalty.

The penalties for late tax returns are:

• an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time
• after three months, additional daily penalties of £10 per day, up to a maximum of £900
• after six months, a further penalty of five per cent of the tax due or £300, whichever is greater
• after 12 months, another five per cent or £300 charge, whichever is greater

There are also additional penalties for paying late of five per cent of the tax unpaid at 30 days, six months and 12 months. Interest will also be charged on any tax paid late.

• To discuss any tax issues please contact me on 01772 430000

NI CHANGES – WHAT THEY MEAN FOR YOU AND YOUR BUSINESS

Here’s a closer look at what the Autumn Statement changes to National Insurance will mean for individuals and for businesses.

As well as income tax, all employees earning more than £12,570 a year pay Class 1 NICs. The main rate of Class 1 NICs will be cut from 12 per cent to 10 per cent from January 6, 2024.

It will mean that over a full year, the average worker on £35,400 will receive a NIC reduction of more than £450. Workers earning more than £50,270 a year will receive a NIC reduction of £754.

The Class 1 NIC rate will remain at two per cent for earnings above £50,270 a year.

There are also no changes to the rate of employer’s Class 1 NICs, which remains at 13.8 per cent.

Self-employed individuals with profits of more than £12,570 a year pay two types of NIC: Class 2 and Class 4.

Class 2 NICs have been at a flat rate sum of £179.40 a year (£3.45 a week) in 2023/24 but no one will be required to pay the charge from April 6, 2024.

And on top of that the main rate of Class 4 NICs will be cut from nine per cent to eight per cent from the same date in April. Class 4 NICs will continue to be calculated at two per cent on profits over £50,270.

The government says that taken together these changes will result in an average self-employed person with profits of £28,200 saving £336 in 2024/25.

Class 2 NICs currently provide the self-employed with access to a range of state benefits, including the state pension.

From April 6, 2024, self-employed people with annual profits above £12,570 – will continue to receive access to the benefits.

Those with profits between £6,725 and £12,570 will continue to receive access to the benefits, via a National Insurance credit.

And if your profit is under £6,752 or you are making a loss, you will be able to continue to pay Class 2 NICs on a voluntary basis in order to maintain access to state benefits.

Class 2 NICs had been due to increase in 2024/25 but it seems that these will be maintained at the current £3.45 weekly level for those in this bracket.

• To discuss any issues raised in this article or any tax matters please contact me on 01772 430000

ARE YOU IN CONTROL OF YOUR COSTS AND CASHFLOW?

Good cash flow and strong cost control are more important than ever for businesses in these challenging economic times.

Having a strategy is vital and it needs to be organised, understood and communicated. If not, any gains made will be short lived and may actually cause more problems than they solve, because change can cause disruption.

The starting point is to think in terms of short-term easy wins and medium-term changes that can be made by altering some approaches to buying – all of which will need to fit within the longer-term strategic plan.

For example, when it comes to heat and light supply – a short-term move could be something as simple as a switch to LED bulbs.

The medium-term change could be a change of energy supplier, with the longer-term strategic aim changes to working practices and solar panel investment.

This thought process can be applied to any part of the business’ costs. In all goals the thought process must be SMART:

Specific: Measureable: Achievable: Realistic: Timeline

All this must be looked at using sound budgeting techniques. Many budgeting processes are completed on the basis of reviewing last year’s figures and adjusting for expected sales fluctuations and inflation.

This misses the very point of why a budget should be done, which is to focus management attention to the issues, focus on specific cost drivers, look realistically at the savings that are achievable in the short, medium and longer term, and to map out over an appropriate timeframe when such savings can be made.

The next step is to then to communicate the aspects of the budget to people who need to understand and contribute to its successful execution.

So be aware – by using last year’s figures as a starting point without drilling down into cost drivers you will miss opportunities to economise.

One approach to cost control is termed ‘Zero Base Budgeting’. This involves an approach in which costs are tackled at the root by re-examining each activity as if it were brand-new and doing so on an annual basis.

Here are some areas worth exploring:

• Purchases – tendering / waste reduction / production techniques / recycling
• Waste disposal costs
• Rates – check for reliefs given to certain sectors
• Rent – negotiate with landlord / understand local market and examine alternative properties
• Utilities / insulation / good practices / training / LEDs etc
• Stationery – a paperless approach saves on paper and postage
• Subscriptions – are they necessary, are they used as they should be?

It also pays to shop around when it comes to areas such as insurance, credit cards, utilities, mobile phones and the internet

Approaches to cost control

• Set budgets and communicate them
• Encourage staff input
• Identify unprofitable lines
• Examine whether to lease or buy vehicles, property and machinery
• Review contracts regularly
• Embrace technology / training / automation / systems
• Consider outsourcing and the use of freelancers
• Explore R&D and claim tax benefits
• Evaluate marketing strategies

• To discuss any issues raised by this article please contact me on 01772 430000

HMRC issues new scams warning

HM Revenue and Customs (HMRC) has issued a new warning for people to be on the lookout for scam texts, emails and phone calls from fraudsters.

The scams take different approaches. Some offer a rebate; others tell customers that they need to update their tax details or threaten immediate arrest for tax evasion.

This warning comes as HMRC reveals it has received more than 130,000 reports about tax scams in the 12 months to September 2023, of which 58,000 were offering fake tax rebates.

Around 12 million people are expected to submit a self assessment tax return before the latest deadline of January 31, 2024.

Myrtle Lloyd, HMRC’s director general for customer services, said: “HMRC is reminding customers to be wary of approaches by fraudsters in the run up to the self assessment deadline.

“Criminals are great pretenders who try and dupe people by sending emails, phone calls and texts which mimic government messages to make them appear authentic.

“Unexpected contacts like these should set alarm bells ringing, so take your time and check HMRC scams advice on GOV.UK.”

People can report any suspicious communications to HMRC in the following ways:

• forward suspicious texts claiming to be from HMRC to 60599
• forward emails to phishing@hmrc.gov.uk.
• report tax scam phone calls to HMRC on GOV.UK.

In the 12 months to September 2023, HMRC says it has responded to 60,000 reports of phone scams alone and got 25,000 malicious web pages taken down.
• To discuss any issues raised by this article please contact me on 01772 430000

Young people urged to claim ‘forgotten’ savings pot cash

Thousands of young people are being urged to claim their ‘forgotten’ savings pots.

New figures have revealed almost 430,000 18-21 year olds have an unclaimed Child Trust Fund, worth an average of £2,000.

The scheme, which was introduced by New Labour in 2002, granted every child a long-term tax-free savings account.

The accounts were set up for every child born after September 1, 2002, with the government contributing an initial deposit of at least £250. Funds can be withdrawn once the account matures when the child turns 18.

The scheme was closed by the coalition government in January 2, 2011, and a recent student survey, conducted by university and college admission organisation UCAS, revealed approximately 430,000 people between 18 to 21-years-old have unclaimed funds in their account.

Now HM Revenue and Customs (HMRC) is urging them to act and claim their cash.

A recent survey, conducted by UCAS, asked first and second year university students about Child Trust Funds and the results showed that they were most interested to know how much money was in their account (43 per cent) and how to claim it (32 per cent).

The survey also revealed that 60 per cent of students got their information about Child Trust Funds from their parents.

Young adults and parents can search on GOV.UK to find out where their Child Trust Fund account is held.

Angela MacDonald, HMRC’s second permanent secretary and deputy chief executive, said: “Many 18-21 year olds are starting out in first jobs or apprenticeships, starting university or moving into their first home and their Child Trust Fund is a pot of money with their name on.

“I would encourage young people to use the online tool to track it down or, for parents of teenagers, to speak to them to ensure they’re aware of their Child Trust Fund. It could make a real difference to their future plans.”

There are currently 5.3 million open Child Trust Fund accounts. Young people aged 16 or over can take control of their own Child Trust Fund, although the funds can only be withdrawn once they turn 18.

More than 500,000 matured Child Trust Fund accounts have been claimed or transferred into an ISA since the oldest children on the scheme turned 18 in September 2020.

Families can continue to pay up to £9,000 a year tax-free into a Child Trust Fund until the account matures. The money stays in the account until the child withdraws or reinvests it into another account.

Sharon Davies, chief executive of financial education charity Young Enterprise, said: “We would encourage all young people to investigate if they have money which is unclaimed in a Child Trust Fund and to use it wisely.

“The investment could be placed into an adult ISA or put towards driving lessons, education or starting a business.

“The money in a Child Trust Fund has the potential to be life changing and the lack of knowledge about them shows the importance of financial education and financial planning from a young age.”

• To discuss any issues raised by this article please contact me on 01772 430000

New guidance on bulk emails

The Information Commissioner’s Office (ICO) is warning organisations to use alternatives to the blind carbon copy (BCC) email function when sending sensitive personal information.

The alert follows a catalogue of business blunders and comes as the ICO publishes new guidance to help organisations understand the law and good practice around protecting personal information when sending bulk emails.

Mihaela Jembei, ICO director of regulatory cyber, said: “Failure to use BCC correctly in emails is one of the top data breaches reported to us every year – and these breaches can cause real harm, especially where sensitive personal information is involved.

“While BCC can be a useful function, it’s not enough on its own to properly protect people’s personal information.

“We’re asking organisations to assess the nature of the information and the potential security risks when deciding on the best method to communicate with staff or customers.

“If organisations are sending any sensitive personal information electronically, they should use alternatives to BCC, such as bulk email services, mail merge, or secure data transfer services.

“This new guidance is part of our commitment to help organisations get email security right. However, where we see negligent behaviour that puts people at risk of harm, we will not hesitate to use the full suite of enforcement tools available to us.”

The critical importance of using appropriate methods to send bulk communications is emphasised in recent ICO enforcement action.

According to ICO data, failure to use BCC correctly is consistently within the top 10 non-cyber breaches, with nearly 1,000 reported since 2019.

Under data protection law, organisations must have appropriate technical and organisational measures in place to ensure personal information is kept safe and not inappropriately disclosed to others.

Those that use and share large amounts of data, including sensitive personal information, should consider using other secure means to send communications, such as bulk email services, so information is not shared with people by mistake.

Organisations should also consider having appropriate policies in place and training for staff in relation to email communications.

For non-sensitive communications, organisations that choose to use BCC should do so carefully to ensure personal email addresses are not shared inappropriately with other customers, clients, or other organisations.