Contractors who trade via their own limited company need to be aware of reporting requirements concerning individuals who hold significant control over the company.
Since 6 April 2016, all private UK companies, limited liability partnerships (LLPs) and societates europaeas (SEs) are required to maintain a register of ‘people with significant control’ (PSCs) over them. Not to be confused with the term ‘personal service companies’, the PSC register aims to increase trust in UK companies through greater transparency over ownership whilst also informing potential investors.
The requirements to keep a PSC register are outlined in Part 21A of the Companies Act 2006 (after being inserted by the Small Business Enterprise and Employment Act 2015). The same information also needs to be filed with Companies House to be made available on the central public register. Non-compliance with the new rules could result in a contractor receiving a fine or up to two years’ imprisonment.
How to identify a PSC
There are numerous qualifying criteria for classifying an individual as a PSC, only one of which needs to be met. Anybody who holds more than 25% of company shares or more than 25% of voting rights in the company is automatically classed as a PSC.
Limited company contractors can identify individuals who fall into either category by reviewing the company’s register of members, however they will find in almost every instance that they themselves are a PSC. Contractors who split their income with a spouse or partner will also likely have to report their details.
Anybody who holds the right to appoint or remove the majority of the board of directors of the company is also classed as a PSC. Contractors can find out whether anybody has this right by checking their company’s constitution. Alternatively, if the company only has one director and somebody has the right to appoint them, that individual would also meet this condition.
These conditions can also be met indirectly. For example, an individual may hold their rights through another company. However, where a company is owned or controlled by another entity, different rules will apply.
In addition to this, an individual may be considered a PSC if they have the right to exercise significant influence or control over the company. The principles and situations where an individual would be a PSC are highlighted in the government’s statutory guidance.
Entering a PSC on the register
Contractors are required to build a comprehensive overview of any PSC of the company. To aid this, the government guidance sets out the information that needs to be collected from each PSC. This includes:
- Name
- Date of birth
- Nationality
- Country, state or part of the UK where the PSC usually lives
- Service address
- Usual residential address
- The date the individual became a PSC in relation to the company
- Which conditions for being a PSC are met
- Whether an application has been made for the individual’s information to be protected from public disclosure
Contractors face strict compliance procedures
Contractors are required to abide by strict compliance procedures, and must take reasonable steps to gather and confirm information. This may include placing restrictions on the shares or voting rights of anybody who might happen to be withholding information. Refusal to provide information or comply with procedures is considered a criminal offence.
In the instance that some information can’t be provided for any reason, other statements will be required to explain why the PSC information is not available. The government guidance reiterates that the PSC register can never be blank.
As well as ensuring that their PSC register is available for inspection on request at the company’s registered office, contractors need to provide the information on the PSC register to Companies House within 14 days of updating their own register. The public will be able to access the central PSC register via Companies House.
Keeping your PSC register up-to-date
Contractors need to continually keep information up-to-date. This involves updating information on the company’s own PSC register and notifying Companies House within a certain period of time of identifying changes. According to the guidance provided, this includes if it has:
- Become aware of a change;
- The information needed to enter on its own PSC register
- Confirmed the information if it relates to an individual who is a PSC and the information has not been provided by the PSC or with their knowledge
Previously, companies were only required to update information with Companies House once a year when submitting a Confirmation Statement. This meant that, in some cases, Companies House could go almost a whole year without being informed of changes to details of a PSC.
“Event driven” filing – how does it work?
However, in 26 June 2017 changes to UK rules were implemented, ushering in “event driven” filing. Firms are no longer permitted to report information via Confirmation Statements, and must comply with the following requirements to ensure that Companies House records remain current:
- If a company believes that an entity has ceased to be a PSC, or that a PSC’s details have changed, they have 14 days to contact the person to confirm the change
- Upon receiving the confirmation, the firm has another 14 days to update the PSC register
- If the firm has opted not to keep their PSC register at Companies House, they must notify the registrar of the changes within the following 14 days after the register has been updated
Contractors are warned that failure to provide accurate information on the PSC register and failure to comply with requests for information are criminal offences. As a result, they may incur a fine or even a prison sentence of up to two years.