Companies House has tightened its rules and expanded its powers under the Economic Crime and Corporate Transparency Act 2023. Maintaining a clean register, lowering fraud, and ensuring businesses submit accurate information on time are the straightforward objectives. The new system is stricter than the previous one, and penalties now cover more than just late accounts.
This change means that compliance is now a must for directors and businesses. Companies House now examines a company’s filing history, behavioural patterns, and response to complaints. If an issue arises, they can act swiftly to address it through fines, investigations, legal action, or referrals to other authorities.
Below is a detailed breakdown of the updated Compliance Framework and the Enforcement Methods that Companies House can use.
Companies House uses this compliance framework to determine the severity of a case and the appropriate course of action. Additionally, it displays how companies’ actions are perceived in the background.
A Level 1 company files early or on time. It updates details when officers change, and it uses guidance or seeks advice when it needs help. Companies House typically uses light monitoring at this level. You might only get regular checks and automated reminders. This is where every company wants to be.
Businesses at this level occasionally miss deadlines, but they fix problems when asked. There are no significant red flags, and the filing history is largely complete.
Companies House may offer extra assistance through its guidance and resources, such as podcasts and webinars, advice via the website, web chat, and special recommendations for new directors.
They may also impose penalties for late accounts or issue statutory notices of default.
A Level 3 company frequently takes shortcuts, misses deadlines, and makes mistakes due to ignorance. The filing history may contain gaps. Corrections are only made in response to pressure from Companies House.
Companies House may become more involved. Enquiries under Part 35 of the Companies Act, the use of querying powers, letters highlighting past shortcomings, and warnings about repercussions are a few examples of this. Additionally, they might annotate the public register to alert others to potentially false information. It is also possible for court orders to compel filing. This level shows that a business is getting into risky territory.
A Level 4 company typically files false information, neglects to update records, and ignores communications. The history may contain gaps and obvious patterns of late filings. It’s possible that some directors will abandon their duties.
Companies House begins to consider drastic measures. Prosecution, director disqualification, default court orders, civil penalties, and possibly removing the company from the register are some of these. This stage is quite serious.
At this level, businesses and individuals completely disregard filing obligations. There are persistent filing gaps, recurring errors, and a tendency to leave businesses. Sometimes the same individuals engage in this behaviour in several different businesses.
All available sanctions may be used by Companies House. Nothing is currently off the table. This is the highest risk category.
The framework is not a strict rule but rather a guide. Every case is evaluated separately by Companies House. If the behaviour is serious or deliberate, they can jump straight to stronger enforcement without moving through every level.
Don’t stress. We’ll manage it for you.
Companies House has a number of tools when a business doesn’t comply. Their goal is always to assist businesses in getting back on track, but if issues persist or the breach is significant, they can escalate swiftly.
Here is what they may use:
Companies House may simply provide guidance to assist the business in complying with minor or unintentional issues.
A greater number of offences are now subject to financial penalties. Penalties can be fixed, daily, or a combination of both. The severity depends on how serious the offence is and whether it is a repeat issue.
In certain situations, Companies House may ask the court to order a business to submit any missing paperwork or rectify any inaccurate information.
Companies House may bring criminal charges if an offence is deliberate, careless, or connected to fraud. False filings and deliberate deception fall under this route.
When behaviour points to fraud, money laundering, or criminal activity, Companies House may refer the matter to law enforcement or other government agencies.
These days, the enforcement system is built on a methodical and precise process. Before imposing a penalty, Companies House usually sends out a written warning notice. This notice explains:
• What offence do they believe has been committed
• What action is needed to fix the issue
• How long do you have to respond
• A financial penalty may be issued if you do nothing
You will always have a minimum of 28 days to either send a representation outlining your circumstances or make the necessary corrections. The penalty might not be applied if the business resolves the problem within this time frame. A formal penalty notice is sent out if nothing changes.
A penalty notice will tell you:
• The type of penalty
• The amount
• How it was calculated
• How to pay
• When the payment is due
• How to appeal
The Registrar has the power to issue either a fixed penalty, a daily penalty, or both.
The severity of the offence and the frequency of incidents within the previous five years determine the scale.
|
Offence type
|
First offence
|
Fourth or subsequent offence
|
|---|---|---|
|
Minor
|
£250
|
£1,000
|
|
Serious
|
£500
|
£1,500
|
|
Very Serious
|
£750
|
£2,000
|
(Source: Companies House Approach to Financial Penalties, GOV.UK)
This is just the fixed penalty. In cases where the offence continues, Companies House can also apply a daily rate that keeps increasing until the company complies.
If a business decides to overlook the issue, the fine will not remain fixed. A daily penalty can run alongside the fixed penalty and continue until the issue is resolved. Delays become very costly as a result.
Ignoring a penalty is not an option. If you do not pay within 28 days, Companies House can:
• Refer the unpaid debt to a collection agency
• Start court proceedings.
• Issue more penalties if the underlying offence continues
• Escalate the matter to prosecution in serious or repeated cases
Companies House may determine that a penalty is insufficient and proceed directly to criminal proceedings if the same serious offence occurs three times in a five-year period.
If you think a penalty was applied incorrectly, you have the right to contest it. Clear evidence, such as medical concerns, administrative mistakes, or evidence that the filing was made on time, must be provided to support a representation or appeal. Before determining whether to maintain or alter the penalty, Companies House will consider all of the arguments.
These rules make compliance a priority rather than an afterthought. Even small mistakes can now trigger a financial consequence. The days of ignoring Companies House deadlines are long gone. Every business needs to be more mindful of data accuracy, filing deadlines, and correspondence with the Registrar.
Many businesses might need to update their record-keeping, evaluate their internal procedures, or clearly assign accountability for statutory filings. This is particularly crucial for directors since both individuals and businesses may be subject to these fines.
Companies House strongly advises taking the following actions:
• File everything on time
• Keep your registered office address valid and regularly monitored
• Update company information as soon as it changes
• Use the free email reminder service
• Check that your accountant or agent is submitting documents on schedule
• Review the Companies Act obligations regularly
Nowadays, the best defence against fines is effective organisation.
For the first time, Companies House has actual authority thanks to the new non-compliance penalties. It’s a straightforward system. Nothing happens if you follow the rules. If you disregard your legal responsibilities, the Registrar will take action, and the expense may increase rapidly.
For UK businesses, this is a significant change, but it also offers greater structure and fairness. Companies are now fully aware of what to anticipate and how to stay out of trouble.
Director Loan Tax Rate Increase: HMRC’s 3.75% Rate &...
Strategic Capital Gains Tax Reporting & Relief Planning UK...
Director Self Assessment It is mandatory for a director...
Top 10 VAT Return Mistakes Small Businesses Must Avoid...
Ready to reach out to us! Request a call back now for a personalized quote!
