UK companies fall short on late filing fines, raising enforcement concerns

UK firms are increasingly defaulting on fines imposed for the late filing of annual accounts, with recent data exposing significant gaps in major companies’ collection efforts.

Over the past six years, between 2018/19 and 2023/24, companies have left an estimated £386 million of the £785 million levied in fines uncollected. The shortfall has prompted industry observers and regulators to question the effectiveness of the current enforcement mechanisms designed to ensure timely submission of accounts.

A key factor contributing to the low recovery rate is the financial condition of many of the fined companies. A considerable number of these firms are either insolvent or operate as “ghost” companies – entities set up during the Covid-19 pandemic to secure government loans, which subsequently become dormant or dissolve without ever settling their fines. In such cases, the penalties, although legally imposed, serve little practical purpose as the funds remain unrecovered.

Critics argue that the automatic penalty system, while intended as a deterrent, inadvertently fosters a cycle of non-compliance.

“If this is the same [directors of companies repeatedly], racking up more and more fines but without meaningful engagement, then this will snowball until authorities begin enforcement,” said Craig Beaumont, executive director at the Federation of Small Businesses.

Johnathan Dudley, a partner at accounting firm Crowe, echoed these concerns, noting that the statistics are “alarming” and serve as evidence of the difficulties in holding directors accountable for their obligations. He warned, “You can threaten what you like, but if you do not engage teeth then this will continue.”

While late filing is a criminal offence with potential personal repercussions for directors, the persistently low collection rate appears to blunt any real deterrent effect.

Some industry experts contend that the penalty structure itself might be too lenient. With fines starting at £150 for private companies filing less than a month late – and escalating to £15,000 for public companies that repeatedly file accounts more than six months overdue – there is concern that the penalties lack the necessary “teeth” to effect behavioural change.

Moreover, the inability to collect fines from companies that have effectively become defunct raises questions about the overall design and enforcement of the regime.

As the UK grapples with broader economic challenges, from rising inflation to shifts in corporate governance practices, ensuring that companies adhere to statutory filing deadlines is seen as crucial for maintaining transparency and investor confidence.

Without a more effective approach to enforcement, the growing gap between fines imposed and fines collected could undermine public trust in the regulatory system—a situation that may ultimately prompt calls for legislative reform.