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Smaller firms escape Companies House rule change as government pauses ‘burdensome’ filing reform

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July 4, 2025
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Smaller firms escape Companies House rule change as government pauses ‘burdensome’ filing reform
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Smaller businesses have been granted a reprieve from new Companies House filing rules that would have forced them to disclose more detailed financial information, as the government halts the rollout over fears it could impose excessive regulatory burdens.

The incoming rules, introduced under the previous Conservative government via the Economic Crime and Corporate Transparency Act, were due to take effect from April 2027. They would have removed longstanding exemptions that allowed firms with turnover under £10.2 million, fewer than 50 employees, and balance sheets below £5.1 million to file “abridged” or simplified annual accounts.

However, new business secretary Jonathan Reynolds has paused the implementation amid mounting concern from small firms and business groups that the measures would require costly new accounting software and create unnecessary red tape.

A government source confirmed the move, saying: “We have paused them — Jonny [Reynolds] is worried it’s too burdensome.”

The decision aligns with the Labour government’s newly announced industrial strategy, which pledges to cut the administrative costs of regulation for business by 25% and encourage economic growth by streamlining compliance for SMEs.

Had the reforms gone ahead, hundreds of thousands of small firms would have been compelled to submit detailed profit and loss accounts in a standardised digital format. This would have made key financial metrics — including turnover and operating costs — publicly visible for the first time.

Supporters of the reform argued that removing the exemption was essential for combating fraud and improving data quality on the Companies House register, which has faced repeated criticism for lax oversight. In April, it emerged that only £1,250 in fines had been collected by Companies House despite its expanded enforcement powers.

Business groups, however, warned that the changes would disproportionately impact smaller companies, who would be forced to pay for new digital reporting tools and potentially face increased scrutiny from competitors. Critics also raised concerns that making more data public could expose vulnerable start-ups to unfair pressure or misinterpretation.

Companies House had previously defended the reforms as a “critical step” towards greater transparency and accountability. But the Department for Business and Trade has now confirmed the plans are under review.

A spokesperson for the department said: “This government is committed to avoiding undue burdens on businesses as part of our plan for change.”

The pause comes as the government faces growing pressure from business leaders to deliver on pledges to support growth and reduce regulatory friction, particularly in the post-Brexit economic environment.

Small business advocates welcomed the move. “The decision to retain abridged accounts is a relief for SMEs,” said one representative. “The cost and complexity of full filings would have been counterproductive at a time when many businesses are already navigating high inflation and economic uncertainty.”

For now, businesses qualifying as “small” under existing thresholds will continue to be able to file simplified accounts — a decision that underscores the government’s shifting approach to economic reform and its commitment to supporting enterprise growth through targeted deregulation.

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Smaller firms escape Companies House rule change as government pauses ‘burdensome’ filing reform

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