Business leaders and entrepreneurs are being warned to act now to avoid being caught out by one of the biggest reforms of UK company law in decades.
In a landmark move to bolster integrity and transparency in corporate governance, Companies House will introduce mandatory identity verification for individual company directors and Persons with Significant Control (PSC) across the UK.
Neil Allcroft, Tax Director at accountancy firm HB&O, one of the largest independent accountancy practices in the Midlands, suspects the change might surprise a lot of companies, particularly smaller firms whose leaders might not necessarily be aware of the reforms.
From November 18, all new directors must verify their identity before incorporating a company or being appointed to an existing one, while existing directors must complete verification by the time of their next confirmation statement within a phased 12-month transition period.
New PSCs, (mainly people who own more than 25 per cent of a business), will be required to verify their identity within 14 days of becoming a PSC and existing PSCs will follow a staggered timetable depending on whether they are also a director or not. In all cases, deadlines are designed to ensure the register quickly becomes more accurate and resistant to misuse.
“I can count on one hand the number of enquiries we’ve had from clients which would suggest this change is going to catch a lot of people off guard,” Neil said.
“Our message to the commercial world is ‘be aware, be on top of it and don’t leave it until the last minute’. This is coming and it’s not optional.
“Larger business with a more structured hierarchy tend to be more compliant. It’s the smaller businesses and the people who tend to do more of the work themselves, rather than engage professionals to do it for them, that may fall foul.
“Thousands of companies have been set up over the years with false or stolen ID. So it’s being brought in principally to stop or reduce incidents of fraud and to make the register more transparent.”
Failure to verify identity by the required deadline could mean an individual is unable to act as a director or PSC. Companies House will have the power to reject filings, impose penalties, disqualify individuals or even, in serious cases, pursue criminal sanctions.
HB&O has registered as an Authorised Corporate Service Provider (ACSP) meaning it can verify identification for individuals for a small fee. Staff have undertaken Home Office training courses so they know what to look out for on a fraudulent document, whether it be a birth certificate, passport or driver’s licence.
The firm is encouraging directors and PSCs, new and existing, to complete the process themselves through the Gov.uk website.
However, Neil believes the process could pose problems for inexperienced and experienced business leaders alike.
“It’s not the most straightforward task,” he said, “and we envisage a lot of people will struggle which means they’re going to have to go to their accountant to provide the service for them.
“I’ve completed the process, but I thought it was more difficult than it needed to be and I could certainly see people having a problem with it. We’re going to have to charge anything from £150 to £250 per ID verification, but this is a cost people can save by doing it themselves.”
For more information about the law change, visit https://changestoukcompanylaw.campaign.gov.uk/identity-verification/.
To find out about the support HB&O can provide as an Authorised Corporate Service Provider, visit https://hboltd.co.uk/compliance-services/
