Most of the recent reforms to Companies House have been broadly accepted, or at least understood in terms of their purpose, as being well intentioned efforts to improve the legitimacy of business filings.
However, one proposed change is generating far more unease as it is difficult to imagine it having any sort of positive impact.
In a misguided attempt to enhance overall transparency, there is a plan to make Profit and Loss (P&L) accounts publicly available.
Given that these are extremely sensitive documents, it is understandable that this proposition has alarmed many businesses.
What exactly is changing with P&L accounts?
At present, P&L accounts are kept strictly confidential, and only those directly involved in a company’s finances usually ever see them.
This makes sense given how much information they reveal and the damage that could be done if the wrong person were to see a P&L account.
A P&L account offers a full picture of a business’s income and expenditure over the year and forms a vital part in the decision-making processes of that business.
Under the new proposals, however, these accounts would need to be filed with Companies House.
Since Companies House records are public by default, there is little sign that P&L documents would be treated differently.
What could happen if P&L accounts become public?
The change is not scheduled to take effect until April 2027, and there is still a chance it could be shelved.
Reports suggest that Ministers themselves are uneasy about pushing it through, but not so uneasy as to quash speculation.
Until there is a clear announcement that the policy will be dropped, businesses should continue raising concerns in the hope of influencing the final outcome.
If the proposals do go ahead, they could seriously weaken competition.
Picture two rival shops on the same high street, each with full visibility of each other’s finances.
In that situation, a stronger business could slash prices, sustain losses for long enough to drive its competitor out, and then raise prices again once the field is clear.
Beyond that, customers themselves might shy away from companies if they don’t approve of the way that the business manages its money, even if they do not have an understanding of why certain decisions are made.
For now, businesses are hoping the Government will rethink before any lasting damage is done.
In the meantime, we remain committed to handling your finances with absolute discretion.
Privacy is essential to running a business, and you can rely on us to safeguard your information.
Whatever direction Companies House takes, our team will make sure your business stays compliant while protecting its interests.
We hope that the soon-to-be-published Companies House 2025-2030 strategy might shed some light on these proposals, one way or the other, and that common sense will prevail.
