Companies House Approach to Financial Penalties

Penalties awarded by Companies House

Companies House imposes a range of penalties on companies in the following key scenarios (a non-exhaustive list):

• failure to submit company’s annual accounts or Confirmation Statement;
• if false or misleading information is provided in company filings;
• non-compliance with statutory requirements, for example neglecting to maintain the statutory registers or notifying Companies House of the changes to Directorships, PSCs, issued share capital, shareholders or addresses); and
• failure to register charges.

With time the penalty amounts increase and higher penalties are given for persistent non-compliance as well.

New position on penalties

In its recent publication, Companies House outlines how they will use their newly obtained enforcement powers to issue financial penalties going forward. With the Economic Crime and Corporate Transparency Act 2023 (Financial Penalty) Regulations 2024 taking effect on 2 May 2024, this approach aims to ensure compliance, maintain transparency, and uphold the integrity of the corporate registry.

Companies House may impose a financial penalty on a person if they believe that an individual is engaged in conduct amounting to a relevant offence under section 1132A of the Companies Act 2006 and, as a result, would issue a warning notice in writing to that person. The individual has 28 days to deliver a representation. It is important not to ignore this written warning and take the required action within that timeframe. Companies House will then consider individual’s representation to determine whether an offence has been committed or not and whether a penalty is appropriate.

Communicating penalties

If the penalty has been issued, it would be provided to the recipient in writing and include the following information:

• the grounds for issuing the financial penalty;
• the type of penalty (fixed, daily rate, or both);
• how the financial penalty is calculated;
• for a fixed penalty, the amount of the penalty; or
• for a daily rate penalty, the amount of the daily rate, the day the amount started to accumulate and the day on which, or the circumstances in which, it stopped accumulating;
• how to pay the penalty;
• the period within which payment is to be made (not sooner than the end of 28 days beginning on the date the penalty notice is given);
• rights of appeal; and
• the consequences of not paying.

Size of the penalty

In determining the size of the penalty, Companies House would take into account:

• Basis: the seriousness of the offence(minor, serious, very serious) and whether it is a repeat offence.
• Repeat Offenders: penalties would increase for repeat offences; prosecution may be considered for severe cases.
• Factors: aggravating and mitigating factors representations made after a warning notice.
• Complained: compliance with requirements before the end of the warning notice period.

It is worth noting that Companies House can change and/or revoke penalties on a case-by-case basis and no penalty would be issued if compliance is achieved within 28 days of the warning notice.

Right to appeal

There is an option to appeal a penalty if court’s permission has been granted (County Court or Sheriff Court in Scotland). You can appeal if the penalty decision is:

• unlawful;
• irrational or unreasonable; and/or
• based on procedural impropriety or contravenes natural justice.

The deadline for application for appeal is within 28 days of receiving the penalty notice and serve written notice of the appeal application to the registrar within 7 days of issuing the application, including the grounds for appeal.

Non-compliance

If the penalty is not settled within 28 days, the Companies House will recover the debt through a debt recovery agency or the court. It may issue further penalties in addition to the original penalty and/or prosecution.

How to avoid penalties

To avoid incurring any penalties, you should stay on top of the compliance requirements and stay up-to-date with changes to UK company law. One easy way to stay up-to-date is to setup automated reminders.

Recommendation

The deadlines can easily be missed, however it doesn’t have to be the case. We recommend the following approach to keep you on track:

• Know your deadlines: visit Companies House beta website and diarise key dates for your company like Annual accounts and Confirmation Statement date.
• Logins and electronic filing codes: make sure you have setup a Companies House web-filing account before the last minute rush to file before the deadline. Also keep your electronic filing code (alpha-numeric 6 digit code) safely available.
• Organise your records: keep all financial records and any other company-related documents in one place, easily located. Under Companies Act 2006 all Statutory Registers (Register of Members, Register of Directors, Register of Secretaries, Register of PSCs, Register of Director Residential addresses) must be kept at the Company’s Registered Office address or SAIL address. Failure to produce the Statutory Registers will lead to penalties.
• Professional help: if this sounds like too much to worry about, there is always an option to outsource this to an external service provider who will use specialist software to keep track.
• Contact outsourced service providers: if your company’s accounts are taken care by your accountant or a service provider – make sure you contact them in advance to check they are on top of the deadline.

If the penalty has been issued, you need to:

• Carefully read the penalty notice to understand the amount and reason for the penalty. It is important to note the deadline for payment or appeal.
• It is possible to appeal if there is a good reason for missing the deadline (for example illness, technical issues, or exceptional circumstances). If this is the case, you will need to gather the evidence to support your case and draft an appeal letter.
• The appeal then has to be submitted through the appropriate channels (email or online) and copies of the correspondence kept as a proof.
• Monitor the response or if you don’t receive one – follow up to ensure appeal is being processed.

You can always contact our company secretarial team on cosec@greenwoods.co.uk to see how we can help.