File on time or face the consequences

10/12/2020

Latest filing penalty figures from Companies House make interesting reading and serve as a timely reminder to all Company directors to ensure that accounts and confirmation statements are submitted on time.

In the year to end March 2020, 179,916 penalties were issued, and despite the large number of aggrieved recipients, only a small percentage were overturned on appeal.

Severe consequences

Filing annual accounts and an annual confirmation statement is a legal requirement for all registered companies and other organisations registered at Companies House. Failure to submit these on time results in filing penalties, and in extreme cases, the company to which they relate could be struck off and cease to exist. Although a company restoration might be possible this can be a lengthy and costly process on top of late filing penalties which must still be paid.

Appeals process

The figures show that a steady 26,502 recipients of penalty notices chose to appeal their fines. But the chances of success are fairly slim, with just a 12.5% success rate resulting from the first and second stages of the appeals process.

Further along the line, a resilient 329 cases were then referred to the Independent Adjudicators for their own independent consideration. It is their own report which throws light on the types of cases where appeals are permitted when compared to those that are not.

Dormancy is no excuse

More analysis reveals that almost a third of appeals reaching the Independent Adjudicator were issued to non-trading companies, such as those that have been newly incorporated, or are otherwise dormant. Reasons offered for such a high proportion include a mistaken belief that since HMRC do not require accounts from dormant companies, Companies House takes the same approach.

To be fair to the relevant Companies, the Adjudicator has acknowledged that the filing of accounts might not be required for some 21 months after incorporation. This could be the first (and last) time that the directors had heard from Companies House, which is a point that has been taken on board with the roll out of email reminders.

Upheld appeals

Successful appeals to the Independent Adjudicator, being the third stage of the appeals process, are even more unusual than in the early stages with just 5.5% upheld or partially upheld. 44% of these fell under the heading of “death, incapacity, health, or other exceptional circumstances”.

Details of the circumstances in these cases have been revealed. A notable upheld appeal occurred where the sole director was arrested without bail and could not file accounts from prison.

Another case was where a sole director was excluded from their home and the company’s registered office so had no access to company records. The director was effectively homeless at the relevant time and the statutory framework separated the director from Companies House correspondence.

Grounds for the remaining appeals fall under the categories of “catastrophe” or delays caused by Companies House themselves.

Avoid penalties. Diarise. File on time.

The clear message from this insight into the appeals process is that the success rate is extremely low even if there is a genuine reason why a deadline has been missed. Best advice therefore for company directors wanting to avoid late filing penalties must be to diarise the deadline and file documents on time.

More information

Pinney Talfourd are experts in Company & Commercial Law and can advise you on changes to the law so you are given up to date advice. Please do not hesitate to contact Edward Garston by email or on 01277 246833 should you wish to discuss anything further.

This article was written by Edward Garston, Partner in our Company & Commercial Team. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of December 2020.

10/12/2020

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