Here, Henry Catchpole gives some top tips on keeping your records management simple and getting it right first time.
Every company is required to file an annual return to Companies House at least once a year. Although this is a legal requirement and a useful ‘snapshot’ of important information, far too many business owners file the return late, do it wrong or avoid it all together. Here, the team from Inform Direct give you some top tips about keeping your records management simple and getting them right first time.
Filing an annual return is a vital part of running a business and, believe it or not, it needn’t be difficult, complicated or time consuming.
Failing to file, ignoring warnings or putting your head in the sand could cause a whole world of trouble for you and for your organisation.
What is an annual return?
An annual return is a yearly statement which gives essential information about a firm’s composition, activities, and capital position.
- Details of current shareholders and any changes since last year.
- A list of serving officers (directors and secretaries).
- The address of the registered office and location of the register of members.
The company’s officers are responsible for ensuring that the annual return is filed on time.
When preparing an annual return, a lot of people get bogged down in paperwork.
This is why it is important to keep your records up to date all year round.
What if I get something wrong?
Companies House uses the term ‘inconsistency’ when they receive information that appears to be inconsistent with the information already on file for a company.
If they identify an inconsistency they will tell you about it.
Receiving this notification could mean that there has been a mistake or that you have forgotten to file a form that should have been delivered before the latest one.
If this happens you should:
- Make sure you understand what you have done wrong.
- Correct any errors in your company’s record by filing any missing forms or by correcting any mistakes in your filing history.
- Make sure that any other errors are dealt with before returning a rejected form.
It is very important that you take action to respond to an inconsistency. If you do nothing you may be publicly marked up as inconsistent and this will be visible to any person searching against your company.
If you continue to do nothing the Registrar may ultimately issue a notice to resolve the inconsistency. If you do not respond to it within 14 days then the company and every officer who is in default may be guilty of an offence and liable for a fine.
What if I file my annual return late?
This is a very bad idea. It’s a criminal offence to fail to deliver the annual return within 28 days of the legal return date and directors and company secretaries can be prosecuted for that failure.
A conviction means a criminal record and a fine of up to £5,000: in some cases, you may also be disqualified from acting as a company director.
You should get several warning letters before Companies House pursue any draconian action but don’t put it off.
It’s worth pointing out that the fines and penalties are usually avoidable which means they are a completely useless drain on resources and cash flow. That cash could be put to so much better use in building your business than swelling the coffers of government bodies.
Here’s our simple tips to avoid a late filing penalty:
- Get ready early, particularly if the annual return you need to submit is your first.
- Know your deadlines. Keep a diary of when things are due or sign up to a free records management service which will help you manage key deadlines and send you email reminders as they approach.
- Be timely. If you’re filing by post, allow enough time for documents to reach Companies House.
- Don’t make excuses. Companies House has heard them all before.
How to avoid identity theft
There is another reason to make sure you are in touch with Companies House and on top of your paperwork every year: corporate identity theft is on the rise.
It can mean fraud being carried out in the name of the company and its existing directors.
And in some cases, the entire business could be stolen with addresses and officers being changed by fraudulent filings with Companies House.
Even if you can regain control of the company, you could lose a lot of money and damage customer relationships in the process.
According to Companies House estimates, around 100 instances of corporate identity fraud occur each month.
The following can help you reduce the risk of corporate fraud, and particularly fraudulent filings being made to Companies House in respect of your business:
- Shred unwanted sensitive company documents.
- Update the security of your IT systems.
- Restrict access to sensitive company information.
- Don’t give out blank letterhead paper that could be used for fraudulent purposes.
- Make Companies House filings electronically rather than on paper.
- Consider changing your six character company authentication code – used for Companies House filing – to something more secure.
- Take out business identity protection insurance.
Henry Catchpole is founder of Inform Direct.