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16 March 2009

Late accounts filing - penalties at Companies House

The new penalty regime for annual accounts filed late at Companies House came into effect on 1 February 2009. Companies and directors need to be aware not only of the increased penalties, but also the potential personal liability of directors, and what trade creditors and the like might read into the late filing in the current climate.

Late filing penalties were introduced in 1992 to encourage directors of limited companies to file their accounts on time because they must provide this statutory information for the public record.  The penalties have been increased to take account of inflation since 1992.

New penalty regime

Regardless of when your accounts became overdue, from the 1st February 2009 the new penalties apply to all accounts delivered late.  They are also applicable to limited liability partnerships, dormant companies and property management companies. Aside from the increases to the penalties themselves it should be noted that the first penalty period has been reduced from three months to one month.  If accounts are delivered late, an invoice is issued automatically to the company's registered office address and if the invoice is not paid, they will be referred to collection agents. If it remains unpaid, legal action may be taken which could result in a County Court judgement or a Sheriff Court decree against your company.

Companies House has very limited discretion to waive a penalty. It cannot do so for reasons such as accounts being delayed in the post and arriving a day or two late. It is recommended that companies file accounts well before the deadline and check that they have actually been received.

Shorter filing deadlines

Under the Companies Act 2006 (2006 Act), the deadlines for filing accounts for financial years commencing on or after 6 April 2008 were shortened by one month, to nine months for private companies.  It should be noted that different deadlines may apply where the accounts relate to the company’s first financial period or where the accounting reference date has been changed during the relevant financial period.

Directors' personal liability

What is important to note is that in addition to penalties to which the company may be subject, late filing of accounts may also give rise to personal liability for the directors of the company.

Failure to deliver accounts on time is a criminal offence. Any Directors registered at Companies House at the time of the missed deadline may be prosecuted and subject personally to a fine of up to £5,000 and, for continued contravention, a daily default fine of £500.  There are also powers under the 2006 Act for the court to order the directors to comply with their filing duties. 

Other consequences of late filing

Particularly in the present economic climate, filing accounts late may have serious consequences for the company’s ongoing trading activities and access to finance, since it might trigger defaults under financing or credit agreements and enable lenders to withdraw committed facilities or overdrafts. This could create a downward spiral of confidence in the business.

Trade creditors and credit insurance underwriters are reported as treating missed filing deadlines as a warning sign as to the financial position of the debtor or business concerned, and the withdrawal of key supplies or credit insurance have been critical features of a number of recent high profile business failures and insolvencies.

Penalties

Companies who have filed late in the previous financial year (and that the previous financial year had begun on or after 6th April 2008) will face fines of double the amounts shown above.

For further information contact Anne Scheland on 01782 205 000 or email anne.scheland@beswicks.com.

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published.Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.

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