For eight years now, I've worked in corporate tax for HM Revenue & Customs. I'm not one of those technical wizards, although when it comes to the administrative end of things, I'm fairly well regarded. These days, I have become something of an authority on e-filed company tax returns, partly because nobody else was interested, and partly because it is, as they say, the future.
One of my key roles is deciding whether or not a return is complete. Not a complex task, you might think, and yet I spend a lot of my time explaining to people their legal responsibilities under the Companies Act 1985 (currently being replaced with the Companies Act 2006). And these are not obscure ones either, but the basis of reporting.
Of course, there is some confusion. Companies House permit the filing of abbreviated accounts by small and medium enterprises, comprising of a balance sheet and notes. However, in order to qualify for this preferential treatment, a declaration must be signed, acknowledging the responsibility of the directors to produce accounts that comply with Section 226 of the 1985 Companies Act. So they do. Then, they file the same accounts with their company tax return. I then reject them. They then ring, or e-mail, complaining that "Companies House accept these, why won't you?".
So I explain. "Your accounts don't comply with Section 226.", I tell them. I then note that they have signed a declaration saying that they will comply. At this point, it usually becomes clear that they have signed the declaration without actually understanding what it means. It is, one should note, a legal declaration. Now I may be old-fashioned, but the idea of signing a legal document without having a grasp of what it means does disturb me a little.
Of course, the compliance weaknesses of small businesses have become more of a concern since the explosion in the number of limited companies being registered. With the current system of consecutive number issuance going back to 1862, it took one hundred and nine years for the millioneth company to be registered. By comparison, more than three million have been registered in this decade, with the seven million mark reached last month.
I would suggest that a significant minority of these need never have become limited companies, and it is clear that, from an administrative perspective, many rookie directors have little grasp of the legal obligations they have taken on. That said, the recent fortifying of the penalty regime for non-compliance, combined with the shortening of filing deadlines, will doubtless concentrate minds... or enrich the accountancy profession...
Meanwhile, I'll still be fielding telephone calls and e-mails from bemused company directors...