UK companies face tougher non-compliance penalties

Companies House, the UK’s registrar of companies, recently announced that it will impose stricter non-compliance penalties for directors who fail to meet their legal responsibilities. This change is a result of the registrar’s enhanced powers under the Economic Crime and Corporate Transparency Act 2023 (ECCTA), which started being rolled out earlier this year.

This article explains everything UK-registered companies need to know about the new rules.

What are the new non-compliance penalties?

The introduction of ECCTA means that Companies House now has much greater powers over company creation and register maintenance. Their objectives are to ensure that responsible company officers meet their statutory obligations, that the company register is accurate and transparent, and that companies are prevented from carrying out unlawful activities. 

To that end, the registrar has introduced more stringent non-compliance penalties. The action taken depends on the severity of the breach and the company’s or responsible individual’s filing track record. 

Enforcement action may involve:

• Written information and advice to help companies improve compliance
• Financial penalties
• Civil action
• Criminal prosecution
• Director disqualification
• Referral to other agencies (e.g. police, HMRC, Financial Conduct Authority) 

For instance, if a company normally files its documents on time but suddenly misses one deadline, Companies House may simply issue a warning and instruct it on how to rectify the error. However, if the firm tends to submit filings late, not at all, or files inaccurate information repeatedly, it may issue a more severe non-compliance penalty. 

The registrar will consider each case individually and support businesses where possible. Generally, the more serious the case of non-compliance, the stronger the penalty. 

In a recent UK government press release, Martin Swain, Director of Intelligence and Law Enforcement Liaison at Companies House, said: “The introduction of these new non-compliance penalties marks another significant step forward for Companies House and our transformations.” 

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He added: “We’ll take a consistent and proportionate approach to these new powers to firmly, but fairly, enforce the law. This will improve the quality of the data on our registers and help us play a greater role in identifying, disrupting and preventing economic crime.”

How Companies House will measure compliance

We mentioned that Companies House will assess the severity of non-compliance and respond with a proportionate penalty. They will measure this using the following compliance framework:

Level 1: Compliant—no effort required

These companies regularly demonstrate that they file their documents early or on time. At this stage, there are no penalties.

Level 2: Compliant with support—minimal effort required

Companies that fall within level two generally file the documents on time and actively seek help to avoid mistakes. There’s generally no cause for concern as they have a complete filing history with no obvious gaps.

In the event of non-compliance, the registrar will issue a penalty and default statutory notices. It will support these organisations through means such as web chat communication and informative webinars.

Level 3: Disregard for compliance—considerable effort needed

Companies House will take stronger enforcement action if companies display repetitive disregard for non-compliance by cutting corners and missing most of their filing deadlines. Level three companies could expect false filing offences and court orders to fill in filing gaps. 

Level 4: Non-compliant—significant effort required

Level-four companies have a strong tendency to file documents late and with inaccurate information. They have regular gaps in their filing history, fail to update their records when prompted, and are generally non-compliant. 

In this case, the registrar could prosecute, disqualify the directors from their positions, issue financial penalties, and even strike the company off the register.

Level 5: Seriously non-compliant—very significant effort required

In the most severe of cases, companies that fall into level five of the non-compliance framework ignore Companies House communications, fail to submit their documents accurately and/or on time, and have substantial gaps in their filing history. 

The registrar will consider sanctions against these companies and those behind them.

What can directors do to avoid non-compliance penalties?

The best way to avoid penalties is to file documents accurately and on time. This is the directors’ duty, and every director should ensure they know their statutory obligations on appointment. 

Naturally, mistakes can happen, but as long as a company’s track record is strong and generally consistent, it is unlikely to receive any severe penalties. 

We help companies stay compliant

Running a registered company can be difficult as there are numerous laws and regulations to adhere to. However, at 1st Formations, we can help make this easier. 

If you need compliance assistance, explore the 1st Formations Full Company Secretary Service. Our expert team will provide up to 15 company changes annually, file annual confirmation statements, prepare and maintain company registers, and more. 

The service costs £149.99 plus VAT and is the easiest way for registered companies to remain compliant all year round. 

Thanks for reading. If you have any questions about compliance, directors’ duties, or general business, please post them below, and we will get back to you.