Our sector is often under scrutiny from politicians, the press, and people with an axe to grind who like to target "do-gooders." It doesn’t help that, from the outside, the way some organisations handle money can look a bit murky. To stay "clean", transparency isn't just a nice-to-have, it’s our best defence.

The "Filleted" Problem

Currently, Community Interest Companies (CICs) and Limited Companies can file "filleted" or "micro-entity" accounts. This means they effectively "slice out" the Profit & Loss sheet before sending it to Companies House.

While accountants often advise this to "protect privacy," "privacy" often contradicts "community interest" and it leaves huge questions unanswered:

• How much are Directors actually being paid in expenses?
• What is the real split between grant funding and traded income?
• How much is a franchise actually costing the local community?

This list is far from exhaustive and, beyond transparency, operating this way can hinder infrastructure organisations, like Nova, from offering timely support and mapping the sector effectively.

The 2027 Shift

The "murky" era is ending. Thanks to the Economic Crime and Corporate Transparency Act, the rules are tightening. By 2027, the option to hide your Profit & Loss will vanish for small companies and CICs. Digital filing will become the standard, and the "identity" of who is running these companies will be verified.

Don't Wait for the Law

When I’m choosing partners or offering grants, I look at Companies House. If I see an organisation hiding behind filleted accounts, it can create unnecessary questions.

My advice? Don't wait for 2027. Be radically transparent now. Show the world exactly how your money flows. It builds trust, and in our sector, trust is an important currency.

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Written by Paul Kilgallon, experienced Enterprise Coach from Participate Projects who works with Nova's Adviser Team to support VCSE organisations (including CICs) in Wakefield District. In this series of blog posts, we're answering your frequently answered questions about running a VCSE organisation.