Companies House’s new Statement of Lawful Purpose is akin to asking a US visitor if they’re a terrorist

While I might have to part company with some of my accountancy colleagues who believe monthly limited company accounting fees will increase due to March 4th security changes by Companies House, I do agree with their underlying message that this might not be the government agency’s finest work, writes Graham Jenner of Jenner & Co.

Companies House has form on fees

But with a long list of fee increases for limited companies also from Companies House, yet effective from May 1st, we’ve been here before. Or rather, Companies House has been here before.

In fact, a few years ago, Companies House were required to reduce their charges for certain documents – notably the Annual Return (now the Confirmation Statement), because the charge on it was higher than the cost to them of processing.

‘Cost-recovery’ basis. Hmm..

It should be noted in any discussion of the quite eye-watering Companies House price increases for PSCs (which are in addition to price increases for LLPs, limited partnerships, overseas companies and overseas entities, among others), that Companies House says:

Companies House fees are set on a cost recovery basis. This means our fees must cover the cost of the services we deliver. We do not make a profit on our fees. 

It is right and proper that no profit is made. Indeed, if memory serves, further to cutting the price of the-then Annual Return, Companies House had to reduce it, not just once but twice -- a few years following its first reduction, when ‘efficiencies’ meant that the agency’s costs were lower.

Companies House says it reviews its fees every year. But it is hard to see that their cost of processing a Confirmation Statement has increased from £13 to £34, in just one year.

No profit, but surely now no loss either

My suspicion is that Companies House has been able to satisfy whoever checks their costs that with form CS01 for example, it shouldn’t be done on a per document basis, but rather on an overall cost basis i.e. that the total cost should cover the total cost.

Here, the idea potentially is that Companies House won’t make a profit, but it now won’t make a significant loss either.

What’s in a £34 Confirmation Statement?

It’s perhaps sensible to look at the May 1st price increases in conjunction with the March 4th security reforms.

Indeed, the new £34 price tag for a Confirmation Statement might very well include the cost to Companies House of amending form CS01’s declarations to reflect the new Registered Office requirement; the Registered Email address requirement and the Statement of Lawful Purpose.

But this latter reform is puzzling – and that’s me being polite. I’m afraid that requiring people to confirm that they are forming the company for a lawful purpose, and to confirm on the Confirmation Statements each year that the intended future activities are lawful, is not going to stop the criminals.

Foolish

It’s possible someone senior at Companies House just got back from the States, and has a sense of humour. Because the Statement of Lawful Purpose reminds me of the question on the US Immigration form:

“Do you seek to engage in or have you ever engaged in terrorist activities, espionage, sabotage or genocide? Yes/No.”

I wonder how many committees the Statement of Lawful Purpose had to go through before it was decided that ‘yes actually -- the most cost-effective way to stop people using limited companies for unlawful purposes is to get the shareholders/directors to confirm that the company’s intended activities are lawful!’ And contractors, I checked but no, it’s not already April 1st.

Finally, a one-off cost, possibly…

But I’d like to end where I started. At this stage, I don’t think limited companies’ monthly accountancy fees will necessarily increase as a result of the Companies House security reforms.

That said, there may be a one-off additional charge to include a Registered Email address, though I think most (fair) accountancy practices will simply add that to the Confirmation Statement submission, as part of their standard fee.

There’s also some additional filing with Companies House which these security reforms were always set to include, notably filing a Profit and Loss account. While Companies House is yet to tell us more about this (N.B. the P&L bolt-on isn’t part of the reforms which apply from March 4th), filing this account won’t be onerous. Despite what he or she might have you believe (!), the new, to-be-detailed P&L account filing will require just a small amount of your accountant’s time.