Data published by Companies House suggests that an increasing number of companies are filing their accounts more than six months late with fines reaching record levels.
Companies House has issued fines totalling £34.4 million for the year ending 2023-24, an increase from £10.2 million in 2019-20. The total number of companies fined for filing accounts more than six months late was 11,463 in 2023-24 compared to just 3,418 in 2019-20.
Businesses that file accounts less than one month late will incur a penalty of £150, rising steeply to £1,500 where accounts are filed more than six months late. Penalties are doubled if accounts are filed late in two successive years.
The reasons attributed to the increase in late filing of accounts are varied, with many stemming from the Covid pandemic. Businesses have faced slow growth and rising costs and may be struggling to convince their auditors that they are financially secure.
Directors and business owners are also working harder than ever, focused on growing the business, meeting the increasingly heavy compliance burden and spending time with family and loved ones. It can sometimes feel that there are simply not enough hours in the day.
Fraud too is an issue with a worrying number of ‘ghost’ companies created to take unfair advantage of Bounce Back loans which were 100% backed by the Government. Of the £47 billion loaned, the House of Commons Public Accounts Committee estimates that £17 billion of Bounce Back loans will ‘never be recovered’ and a further £4.9 billion ‘lost to fraud’.
It has also been suggested that the penalties faced by businesses for filing accounts late is too low, meaning that many directors simply do not see a fine of £150 a particular problem.
What many directors perhaps fail to realise is that the late filing of accounts will also mean delays in paying Corporation Tax. Corporation Tax is due one day after the accounts filing deadline. Delays in paying Corporation Tax will attract stiff penalties.
Directors should also be aware that the late filing of accounts is a criminal offence. In 2022-23, 856 company directors were convicted. Criminal convictions may leave individuals unable to hold company directorships or open to further sanctions and restrictions if operating in regulated industries.
There are, of course, many more mundane reasons why a business might be late filing their accounts, from a simple administrative oversight, errors in the accounts, group restructuring, key staff sickness or even natural disasters such as business premises being flooded.
Whilst penalties for the late filing of accounts are triggered automatically, Companies House is not unsympathetic where the late filing of accounts is outside of the control of company directors. Where directors can show that they have done everything they reasonably could to file on time, fines may be waived.
How Hillier Hopkins can help
Hillier Hopkins works with businesses of all sizes to help manage and meet reporting requirements. That may mean finding a practical way to help business owners find the time each week to keep financial records up to date, or to manage bookkeeping on their behalf making the year end accounts preparation a little easier.
Company directors who expect their accounts to be filed late should act proactively. This will start by taking advice from your accountants who may, if there are extenuating circumstances, be able to seek a filing extension or appeal a penalty.
