Category: Corporate Governance & Regulation

Companies House has developed and launched a new temporary online service to upload and send completed forms during the Coronavirus outbreak. The online service was first launched at the beginning of June. The latest release of the upload a document service was issued on 6 July and now allows users to upload more form types, including Scottish limited and qualifying partnerships, articles and resolutions. This temporary service is designed for paper forms that could previously only be sent by post or delivered in person to Companies House.

The main categories of forms that the temporary online service relate to:

• Scottish limited partnership forms
• Scottish qualifying partnership forms
• Registrar's powers
• RP forms
• Change of constitution
• Resolutions in relation to change of constitution (CC) forms
• Articles in relation to change of constitution (CC) forms

Companies House is working on a new release to allow a large number of insolvency forms to be submitted via the upload service in the coming weeks.

The service is not available nor intended for the large number of Companies House documents that were already accepted online before the pandemic began. This includes documents relating to filing accounts, filing a confirmation statement, making changes to a company and closing a company.

Companies House has announced the restart of the process for companies that have applied for voluntary strike-off, from 10 September 2020. All voluntary strike-off applications were suspended in March 2020 in response to the Coronavirus pandemic.

The press release published by Companies House outlines the following changes:

• When voluntary strike off action restarts from 10 September 2020, if there have been no objections to dissolution and the 2 month period from the publication of the Gazette notice has expired, the company will be struck off shortly afterwards.
• Any person with an interest in a company which is nearing strike off should register an objection to dissolution at Companies House. Where a person has already registered an objection, but the time period for that objection is due to expire, that person must register the objection again if it is still required.
• Applications for voluntary strike off from 10 July 2020 onwards are not affected by the temporary suspension because the easements for voluntary dissolution only apply to strike-off applications registered before 10 July 2020.  If there are no objections to the dissolution, the company will be struck off in around 2 months’ time.

The compulsory strike-off process remains paused. Companies House will continue to review this measure on a monthly basis and notify any changes.

The Corporate Insolvency and Governance Act 2020 (the Act) received Royal Assent, with most provisions coming into force on 26 June 2020. The Act addresses numerous issues arising for businesses from the COVID-19 pandemic to give distressed businesses the breathing space they need to get advice and seek a rescue

Some of the key provisions of the Act are as follows:

• introduces temporary easements for Annual General Meetings (AGMs) and filing requirements for public limited companies (PLCs)
• introduces new corporate restructuring tools to the insolvency regime to give companies the time they need to maximise their chance of survival
• temporarily suspends parts of insolvency law to support directors during this difficult time

Under the secondary legislation, companies will temporarily receive an automatic extension for:

• confirmation statements
• registrations of charges (mortgage)
• event-driven filings, such as a change to your company’s directors or people with significant control

Most companies will also be given more time to file their accounts. If a company is eligible, Companies House will update the filing deadline automatically and the new deadline should be adhered to. Companies do not need to apply for an extension.

HMRC is responsible for the money laundering supervision of a number of businesses including estate and lettings agents. Estate agency businesses that HMRC is responsible for supervising should be aware of the requirement to register with HMRC and the penalties for not doing so. It is a criminal offence to trade as an estate agency or letting agency business (as defined within the Regulations) without being registered for money laundering supervision.

The following business types are not required to register:

• a lettings agent only carrying out lettings work not defined within the Regulations, for example, below 10,000 euros per month
• an auctioneer already registered with HMRC as a high value dealer
• publishing adverts or distributing information, for example in a newspaper
• an intermediary, like an internet property portal for private sales, allowing private sellers to advertise their properties and letting sellers and buyers to contact each other (but only if you do nothing else covered by the general definition of estate agency work)
• a solicitor carrying on estate agency work as part of that practice as a solicitor, and not as a separate business

There are also estate agents who may be regulated by the Financial Conduct Authority (FCA), for example, because they provide consumer finance or hire purchase services. In this situation HMRC and the FCA will consider the possibility of a single supervisor overseeing the anti-money laundering arrangements on a case-by-case basis.

There are special rules in place which limit the ability to change a company’s year-end date. A company’s year-end date is also known as its ‘accounting reference date’ and is historically set by reference to the date the company was incorporated. Under certain circumstances it is possible to make a change to the year-end.

As a general rule, you can only change the year-end for the current financial year or the one immediately before it. Making a change to a year-end date will also change the deadline for filing accounts (except for during a new company’s first financial year).

There is no limit to the amount of times you can shorten a year-end date, but you can only extend the period to a maximum of 18 months once in every five years. The financial year can be extended more often under limited circumstances such as when the company has been put into administration.

A request for a change to an accounting reference date can be made online using the Companies House online service or by using a postal version of the Change your company accounting reference date (AA01) form. No change can be made to a period for which accounts are overdue.

There is no overriding reason for using one date over another but there are a number of factors to consider. The most common year end dates are usually 31 December (to coincide with the end of the calendar year) or 31 March (to coincide with the end of the tax year).

Company directors and other eligible people such as company secretaries, people with significant control (PSC) and LLP members can apply to remove their personal addresses from the UK’s official company register on Companies House.

Company directors and others are still required to provide an alternative correspondence address if they are appointed to a live company. If they are no longer appointed to a company, then an alternative address is not required and only the first half of their postcode will be made available to the public. The option to remove your home address from the public register is not available if the home address is the same as the company’s registered office address.

There is a charge of £55 per document where a director wants to suppress their home address. During the COVID-19 outbreak, the fee should be paid online before the application is submitted. The quickest way to proceed is to email a copy of the SR01 application to Companies House. This will allow Companies House to process the application without delay. Applicants can still send a completed SR01 application by post, but it is taking Companies House much longer than usual to process paper applications due to Coronavirus.

Companies House has confirmed that businesses will be provided with additional support to help them meet their legal responsibilities in light of the COVID-19 outbreak.

The measures include the following:

1. Companies House will temporarily pause the strike off process to prevent companies being dissolved. This will give businesses affected by the coronavirus outbreak the time they need to update their records and help them avoid being struck off the register.
2. Businesses can make an application for a 3-month extension to the deadline for filing their accounts. Businesses must apply for the extension before their filing deadline. Companies House has confirmed that those citing issues around COVID-19 will be automatically and immediately granted an extension. The best way to file is using the Companies House fast-tracked online system.
3. Companies House have also stated that companies issued with a late filing penalty due to COVID-19 will have appeals treated sympathetically.
4. The Secretary of State will continue to monitor what companies are filing and will provide further extensions if needed.
5. The government will introduce legislation to ensure those companies required by law to hold Annual General Meetings (AGMs) will be able to do so safely, consistent with the restrictions on movement and gatherings introduced to address the spread of coronavirus. This will include greater flexibilities, including holding AGMs online or postponing the meetings whilst the COVID-19 outbreak continues.

Company directors, company secretaries, people with significant control (PSC) and LLP members can apply to remove their personal addresses from the UK’s official company register at Companies House. 

Prior to the introduction of this law (in April 2018) it was only possible for a director to ask for their personal address to be "hidden" if they could demonstrate that they were at a serious personal risk of violence or intimidation.

Company directors and others are still required to provide an alternative correspondence address if they are appointed to a live company. If they are no longer appointed to a company, then an alternative address is not required and only the first half of their postcode will be made available to the public. 

There is a charge of £55 per document where a director wants to suppress their home address. The option to remove your home address from the public register is not available if the home address is the same as the company’s registered office address. 

During the COVID-19 outbreak, the quickest way to ensure your SR01 application is processed is to email a digital copy to Companies House. This will allow Companies House to process the application without delay. 

However, you must also send a completed paper SR01 and cheque or postal order (£55 per document listed) by post which will be processed in due course. Any applications processed by Companies House without receipt of the completed paper document or the correct fee may result in the redacted information being placed back onto the public register at a later date.

There are automatic late filing penalties which are designed to encourage companies to file their accounts and reports on time. All companies, private and public, large or small, trading or non-trading must send their accounts to Companies House.

Companies House is advising businesses to take appropriate measures to file on time. If, immediately before the filing deadline, it becomes apparent that accounts will not be filed on time due to your company being affected by Coronavirus (COVID-19), you may make an application to extend the period allowed for filing. You must apply for the extension before your filing deadline. The best way to file is online.

If you do not apply for an extension and your accounts have been filed late, an automatic penalty will be imposed. The registrar has limited discretion to cancel the collection of a penalty.

Companies House has stated that each appeal is treated on a case-by-case basis, and they already have policies in place to deal with appeals based upon unforeseen poor health. Appeals based upon COVID-19 will be considered under these policies.

A recent County Court case serves as an important reminder to comply with the requirements to preserve and maintain proper company accounting records. The case concerned a fast food takeaway company in Walsall. The sole director of the company was found to have failed to submit adequate accounting records to the tax authorities. This resulted in his disqualification from acting as a director for 7 years during which he cannot be involved, directly or indirectly, with the formation, promotion or management of a company without prior permission of the court.

Dave Elliott, Chief Investigator for the Insolvency Service, said:

'The company director's duty was to maintain and preserve his company’s financial records. If he had done this, he would have been able to provide information to the tax authorities and also the liquidator attempting to wind-up the company’s affairs. This should serve as a reminder to all directors to comply with their statutory duties.'

There is a requirement to hold company records for 6 years from the end of the last company financial year they relate to, or longer if:

• they show a transaction that covers more than one of the company’s accounting periods
• the company has bought something that it expects to last more than 6 years, like equipment or machinery
• you sent your Company Tax Return late
• HMRC has started a compliance check into your Company Tax Return.

If your company records have been lost, stolen or destroyed you must do your best to recreate them. You are also required to tell your Corporation Tax office straight away and include this information in your Company Tax Return.

The money laundering rules are designed to protect the UK financial system and put in place certain controls to prevent businesses being used for money laundering by criminals and terrorists. The money laundering and terrorist financing (amendment) regulations 2019 (MLRs) came into force on 10 January 2020. This updates the existing regulations to incorporate international standards set by the Financial Action Task Force (FATF) and to comply with the EU’s 5th Money Laundering Directive.

The key changes for businesses dealing with HMRC mean that money service businesses and trust or company service providers who apply to register from 10 January 2020, will not be able to carry out relevant activity until HMRC has determined their application for registration.

HMRC will now supervise two new groups of businesses that are subject to the new anti-money laundering regulations. 

Firstly, letting agents who rent out property valued at 10,000 euros or more for a minimum of one calendar month, including both commercial and residential property – the online system for these letting agency businesses to register will open in May 2020.

Secondly, those in the art market who deal in in sales, purchases, and storage of works of art with a value of 10,000 euros or more, whether this is for a single transaction or series of linked transactions, regardless of payment method used – art market participants can register now via the online system. Businesses must register by 10 January 2021. The changes also add more categories within the scope of the anti-money laundering regulatory framework.

There are a limited range of circumstances when a company can request to be removed from the register (known as being struck off). For example, a voluntary strike-off can be requested by a dormant or non-trading company.

A limited company can be closed down by using this striking-off process, but only if it:

• hasn't traded or sold off any stock in the last 3 months. For example, a company in business to sell apples could not continue selling apples during that 3 month period but it could sell the truck it once used to deliver the apples or the warehouse where they were stored.
• hasn't changed names in the last 3 months
• isn't threatened with liquidation
• has no agreements with creditors, e.g. a Company Voluntary Arrangement (CVA)

If the company does not meet these conditions, then the company will need to be liquidated (also known as a 'winding up').

Before applying for a strike off, the company must be legally closed down. This involves:

• announcing plans to interested parties and HMRC
• making sure employees are treated according to the rules
• dealing with business assets and accounts.

A tax accounting period for Corporation Tax purposes cannot exceed a 12 month period. If company accounts cover less than 12 months then the accounting period will normally end on the same day, and thus will be shorter than 12 months. This can happen if the company stops trading or shortens its company’s year-end: also known as its accounting reference date.

There is an interesting anomaly if the company has more than one trade. If this is the case, the company may make up accounts for one or more of them with different accounting dates, instead of one account for all its activities. In a case like this, the company should agree the accounting date it will use. Normally a date which achieves an unbroken succession of 12-month periods is preferable.

Companies may also have to contend with having two different company accounting periods. This is because there are different rules for Companies House filings and for HMRC to whom any Corporation Tax due is ultimately paid.

Under certain circumstances, companies (including non-resident companies trading from a branch or agency in the UK and local authorities) can have a duty to deduct tax in connection with certain payments. In effect the company accounts for all or part of the tax liability on behalf of the recipient of the payment.

For example, from:

• payments of yearly interest
• annual payments
• patent royalties
• royalties etc to a person who lives abroad
• the proceeds of a sale of patent rights paid to a non-UK resident
• chargeable payments connected with exempt distributions
• directions for deduction from payments to non-UK residents.

Companies (and various other entities) making these deductions are obliged to account for the amounts deducted using form CT61. HMRC is happy for the entries on these forms to give aggregated figures of amounts paid or credited and the tax deducted for the return period. However, the payments should be split for pre and post 5 April interest to reflect any change in the tax rate.

A Close Company is broadly defined as a company that is controlled by:

• five or fewer participators or
• any number of participators who are also directors or
• where more than half the assets of which would be distributed to five or fewer participators, or to participators who are directors, in the event of the winding up of the company.

A participator is broadly somebody who has a share or interest in the capital or income of a company such as having share capital, voting rights or a right to capital on winding up of the company. This can be a shareholder, director or a loan creditor.

Most small private companies will meet the definition of a Close Company and there are some specific tax rules that apply to these companies. This includes, for example, where a Close Company pays for personal expenses of a director or makes a loan to one of its participators.