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The Economic Crime and Corporate Transparency Act (2023) will bring about some of the most substantial changes to company law since 1844. Its main goal is to make business practices more transparent and tackle financial crime more effectively.ÂÂÂÂ
So, what does this mean for small and large businesses? Let’s break down the key points and what you need to know to stay ahead.ÂÂÂÂ
A Stronger Role for Companies HouseÂÂÂÂ
Companies House has always played a key role in maintaining company records, but the new legislation gives it far more power. In the past, it acted more as a passive record-keeper, checking that documents were filed and available to the public. Now, it’s shifting to a much more proactive role. Companies House will actively make sure that the information it holds is accurate, trustworthy, and up to date. It will also have the power to prevent companies from being used for unlawful activities such as money laundering and fraud.ÂÂÂÂÂÂ
Key Changes for BusinessesÂÂÂÂ
The new Act presents some of the following important changes that will affect the operation of businesses in the UK. Here’s a closer look at what you need to know:ÂÂÂÂ
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Identity VerificationÂÂ
One of the biggest changes is that company directors, people with significant control (PSCs), and anyone submitting filings on behalf of a company will now have to verify their identity. This means no more anonymous registrations. If you’re involved in running or managing a business, you’ll need to prove who you are. It’s a straightforward step but an important one, helping to make the system more accountable and transparent for everyone.ÂÂÂÂ
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Increased Data Sharing and Enforcement PowersÂÂ
Companies House will also be able to improve investigation by sharing information with law enforcement agencies. If something looks suspicious in a company’s filing, it can be flagged, questioned, and even rejected. This added scrutiny is crucial for preventing companies from being used for illegal activities like fraud or money laundering.ÂÂÂÂ
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Changes for Limited Partnerships (LPs)ÂÂ
By spring 2026, limited partnerships (LPs) will also be subject to new transparency rules. In the past, LPs have sometimes been used to conceal ownership or shady activities. Under the new regulations, LPs will need to be more upfront about who owns and manages them. This shift will align them with other types of businesses, ensuring a consistent level of transparency and accountability.ÂÂÂÂ
Timeline for the ChangesÂÂÂÂ
These changes aren’t happening overnight. The government is phasing them in over the next few years, giving businesses time to adapt. Here’s a brief overview of when you can expect the key reforms to come into play:ÂÂÂÂ
- March 2024: Companies House began using its new powers to query filings and remove suspicious or incorrect information.ÂÂ
- Spring 2025: The first wave of identity verification starts, initially focusing on Trust and Company Service Providers (TCSPs).ÂÂ
- Autumn 2025: Identity verification becomes mandatory for new company incorporations, with a 12-month window for existing companies to comply.ÂÂ
- Spring 2026: Further reforms, including changes for limited partnerships, will come into effect.ÂÂ
ÂÂYou can visit theÂÂCompanies Housefor more information.ÂÂ
What Should You Do to Prepare?ÂÂÂÂ
For most businesses, these changes won’t cause too much disruption, provided you follow the rules. The main thing to focus on is ensuring your company’s information is accurate and up to date and that all directors and PSCs verify their identities.ÂÂÂÂ
It is a good idea to start reviewing your filings now instead of waiting until the last minute. If companies ignore these changes or don’t follow the new rules, they could face penalties. On the bright side, adopting these changes early shows you are serious about transparency and good governance, which will help boost your reputation with clients and investors.ÂÂ
iXBRL Tagging
If you are looking for support with converting your financial statements into iXBRL, the team at DataTracksis here to help. You can contact them at +44 (0) 203 608 8035 or via email atenquiry@datatracks.co.uk.
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