Insight Associates provide outsourced accounting and Finance Director services to ambitious and growing businesses. We work as your only resource or with existing staff to give you complete financial support including monthly management accounts, high level financial advice, robust controls and financial systems, funding and business planning, payroll & compliance, VAT returns and statutory compliance.

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Friday, February 06, 2009

The price of limited liability ...

The price of limited liability ... has just gone up!

As of 1st February 2009 Companies House has increased the level of fines for the late filing of company accounts. This is the first increase since the fines were originally introduced in 1992. In addition there has been a change in the penalty bands which are now shorter, and a double penalty for persistent late filings.

Companies House state that the fines system has been very effective in increasing the proportion of accounts that are filed on time from less than 60% to over 86%. However, in recent years as the fines have been impacted by general inflation their effectiveness has decreased. Indeed Companies House state that may companies have been waiting until the very end of the three month overdue period and pay the small £100 fine, almost treating it as a charge for taking three months longer to file!

Within the UK creating the protection of limited liability for any business is very simple indeed. The process of registering a company is quick and easy and the protection afforded if the officers act properly is huge. One of the small prices that you pay is some element of transparency in that you must then file your accounts on a public record (Companies House).

At present a private limited company has 10 months (soon to reduce to 9 months) after the end of its financial year end (Accounting Reference Date) to get it's accounts completed and filed. This should be very easy for any business that has any decent system of financial management and control in place, but it seems many still struggle. A properly managed business should of course have continuous information about its financial picture, and so a "year end" is really just another day. This only leaves the process of producing accounts in the statutory form for filing. A simple enough process if the accounting records are kept to any sort of standard!

The changes to the fines are quite significant. The present £100 fine for being 3 months late changes to £150 for 1 month late, and £375 for up to 3 months late. The 3 to 6 months fine increases from £250 to £750, and the over 6 months becomes £1,500 from £500. The over 12 months band has been dropped.

In addition companies that file late for a second year will have the penalties doubled.

At the end of the day, as discussed above, this really should never be an issue for a well run business. However, it is clear from the number of late filings that it is, and this can only send a very clear signal to the wider world that the business has significant internal issues.

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