Businesses left to pick up the tab for Employment Rights Bill
6 November 2024
Recently, we’ve been answering a lot of questions about the Economic Crime and Corporate Transparency Act (the Act) parts of which came into force a few months ago.
Clearly, there’s still some confusion amongst SME owners as to exactly what the Act entails and whether they should be concerned.
We wanted to write a short blog explaining what you need to know and what we are currently recommending to our clients.
What does the Act mandate? A summary
The Economic Crime and Corporate Transparency Act received royal assent at the end of 2023 and builds on the previous Economic Crime (Transparency and Enforcement) Act passed in 2022.
Here is a quick summary of key measures in the Act:
In addition, new identity verification requirements at Companies House will affect directors, persons with significant control (PSCs), and those filing documents.
Verification can be direct by Companies House or indirectly via an Authorised Corporate Service Provider (ACSP).
This one-off verification, subject to re-verification in cases of fraud suspicion, is mandatory for all UK and overseas company directors, PSCs, relevant legal entities (RLEs), and individuals filing documents.
Failure to prevent fraud
A key measure to consider under this new legislation is the updated ‘failure to prevent fraud’ offence. If your business unknowingly becomes a conduit for economic crime, you could be held accountable.
It will apply to all sectors, but it will specifically target large organisations as defined by the Companies Act 2006.
To be categorised as a “large organisation”, a company must meet at least two of the following criteria:
Companies House, where you register company information, will now play a more active role in preventing and dismantling fraudulent companies.
Large organisations who believe that they may meet the above criteria should discuss with their advisors putting in place appropriate compliance procedures and policies as a way to possibly mitigate any potential liability.
What are the financial and tax implications?
Simply put, financial reporting and accounting are going to get more stringently examined.
The Act demands detailed and transparent reporting, directly impacting how you manage your accounts and taxes.
Expect more paperwork and potentially, more time spent with your accountant.
The positive to this is that it becomes harder for illegitimate businesses to tarnish the market, giving your legitimate business a clearer path to success.
Compliance strategies for SMEs
Staying ahead of the curve is key. You should adopt robust filing and disclosure practices.
If you haven’t already, consider talking to your accountant or financial advisor about your tax returns.
We can help you navigate these changes smoothly, ensuring your business remains compliant with the new regulations.
What does the future look like?
While the new regulations may bring some initial challenges, the long-term benefits – a level playing field and enhanced trust in UK businesses – are undeniable.
We are recommending that our clients work closely with their accountants to maintain accurate and efficient tax filings.
Errors and inaccuracies could, now, create significant complications and possibly financial penalties for your business.
Whatever the case, a quick chat with your accountant could help put your mind at rest.
Speak to one of our team to find out if your current filing practices are up to standard under this new regulation.
6 November 2024
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Have a question? Contact us and a member of our team will get back to you.