How today’s Companies House rule change affects UK entrepreneurs

From today, new directors will need to verify their ID when registering a new company on Companies House; as the Government seeks to tackle fraud. Existing directors have until next year for the same changes to impact them.

There has been reported discontent that this adds another burden on companies, who are also trying to get to grips with the Making Tax Digital roll-out as well as wider changes to the details that businesses need to provide to HMRC.

However, the government – and experts – argue that it is necessary to fight fraud; and is a simple process to follow.

What are the ID changes?

The changes are actually part of the Economic Crime and Corporate Transparency Act (ECCTA), which was passed by the previous Government. It aims to tackle fraudulent business registrations and improve corporate transparency.

It is now law for directors, people with significant control (PSCs) and presenters of documents to Companies House to carry out mandatory ID checks. Business owners can contact Companies House directly, either online or via the Post Office to provide their ID or they can verify using an Authorised Corporate Service Provider (ACSP), like an accountant, lawyer, or secretary.

The voluntary ID verification facility has actually been available since 8th April this year. While many businesses have months before their deadline, experts are encouraging them to get on top of this now.

Naomi Rich,COO at Prosec which provides secretarial support for UK companies, says: “Only around 1.5 million of the UK’s seven million directors have verified so far, suggesting many still have work to do. Verification itself is straightforward, yet leaving it too late could cause a bottleneck at the point you need to file or update details, resulting in both frustration and fines.”

While she recognises that it does take valuable time, she – and other experts argue – that completing the ID verification now will save time and money later.

Greater powers for Companies House

The ID requirement is another step in a pathway towards greater transparency and accountability in financial interactions with the Government.

Companies House has been able to reject suspicious filings, query company names, remove inaccurate information from the register, and reject disqualified company directors since March 2024.

In March of this year, the ability to expedite the process of striking off companies formed with false information was added. For more than a year now, it has also been able to issue financial penalties for non-compliance.

All of these changes are taking aim at fraudsters; as is the switch over to the GOV.UK One platform for businesses currently using a Companies House WebFiling log in. The deadline for this change was 13th October.

This means that interactions with Companies House like filing annual accounts; registering a company; making changes to the company’s directors or secretary roles, and authorising who can file for the company online must now all be carried out through the GOV.UK One platform.

Wider changes afoot

While the ID verification scheme isn’t onerous; there is concern about a potential red tape pile up for SMEs that will impact entrepreneurism. In March, Companies House admitted that new business registrations had dropped for the first time since quarterly reporting began, which many took as a red flag.

The Government says it is listening and has offered a temporary reprieve on changes that were set to kick in from April 2027. These would have seen SMEs having to submit detailed profit and loss accounts instead of simplified annual accounts. These accounts have been submitted in a standardised digital format, which would mean having to buy new software for many ventures.

The changes were set to impact SMEs with a turnover of less than £10.2m, fewer than 50 employees, and balance sheets below £5.1m. This has now been temporarily shelved. However, there has been no reprieve for sole traders for whom Making Tax Digital will kick in from next April.

For businesses though, this switch will come in at some point and so readiness is encouraged. In the meanwhile, business owners have plenty of other changes to comply with as the Government pushes ahead with its mandates; and ignoring this, say the experts, will only mean potential fines and business disruption.