In 2014/15, the number of penalties issued in England and Wales stood at 165,000 with a total value of around £78m. However, in 2017/18 the number had reached 204,000 with a cost to businesses of around £87m.

Companies are required to report their annual accounts to Companies House as well as HMRC. A late filing penalty (LFP) can be imposed by Companies House under s453 of the Companies Act 2006 (CA 2006). Private Limited Companies can be fined £150, for up to one month after the deadline, to £1,500 for filings six months late. Public Limited Companies can be fined between £750 and £7,500. If a company files late for two consecutive years the penalty amount can be doubled.

Companies can appeal against late filing penalties if they can prove that the circumstances were beyond the control of the director, such as in the case of company records destroyed by fire, but appeals claiming that a company was dormant or unable to pay, among other conditions, will be disregarded.

A late filing penalty is a civil penalty and not a criminal offense. In addition to these sanctions, directors can be fined up to £5,000 for failing to file company accounts and annual returns on time and a further charge of £500 a day for additional compliance delays.

There are around 5.7m small and medium-sized businesses (SMEs) in the UK with fewer than 250 employees, accounting for nearly 99% of the total number of businesses.

Federation of Small Businesses (FSB) figures show that the number of businesses increased by 197,000 between 2016 and 2017.

In its business plan, published in April 2018, Companies House pledged to expand its digital services and to ‘enable accounts filings as fully as possible, focusing initially on providing a digital filing service for those customers who need to file “small company, full accounts”’.

Michaela Johns, SME specialist at accounting firm HWB, said: ‘Companies House is clearly stepping up enforcement. This spells trouble for businesses that do not have their house in order and, particularly for SMEs, where Directors are often having to juggle business growth and back-office administration.

‘It is sometimes unavoidable to file annual accounts until the last minute, but I would urge companies to be as prepared as possible. Businesses can also embrace electronic filing or consider outsourcing in order to gather the necessary information to produce good accounting records and meet the deadlines on time.

‘With a little forward planning, there is no reason why filing annual accounts needs to be a headache - and it could save businesses a lot of money that could be channelled into profitability and growth.’

Companies House Annual Report 2017-18 is here

Report by James Bunney