Fourth Standing Committee
on Delegated Legislation
Thursday 4 November 2004
[Mr. Peter Pike in the Chair]
Companies (Fees) Regulations 2004
2.30 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Gerry Sutcliffe): I beg to move,
That the Committee has considered the Companies (Fees) Regulations 2004.
The Chairman: With this it will be convenient to consider the Limited Liability Partnerships (Fees) Regulations 2004.
Mr. Sutcliffe: I welcome you to the Chair of what I hope is an uncontentious Committee, Mr. Pike.
The regulations will apply to England, Wales and Scotland but not Northern Ireland, which has its own Companies Registry. They revoke the existing company fees regulations, which were introduced in 1991 and have been amended by statutory instrument eight times. They also revoke the limited liability partnerships fee regulations, which were introduced in 2001 and amended the following year. These regulations make new consolidated fees regulations for companies and LLPs, which provide for a revised scale of fees to be payable to the registrar of companies with effect from 1 February 2005.
Consolidating the company fees regulations fulfils a commitment to the House and makes them self-contained and therefore easier to understand. The LLP fees regulations will harmonise the equivalent higher registration fees for LLPs with the lower registration fees applicable to companies. The fees set by the regulations will be mirrored in another statutory instrument, to come into force on the same date, with the effect that the equivalent fees for European economic interest groupings will be the same as those for companies and LLPs.
During the debate, I shall concentrate on the company fees regulations, as companies comprise the major part of the register and are the largest group affected by the regulations.
To equip Companies House to set appropriate fee levels for the regulations, a comprehensive internal review of all Companies House fees has taken place. Headed by a civil servant from another Department, it was undertaken in response to a number of factors, most notably changes in customer demand, volumes and computer technology, and the increasing use of electronic services.
In addition, in 2002 the Office of Fair Trading concluded its investigation into the pricing of Companies House products. It found that Companies House had not infringed the Competition Act 1998 by abusing its dominant position in the market for
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company information. However, it highlighted the need to ensure that pricing is calculated on the basis of up-to-date models. The review analysed the statutory framework for setting fees and recommended that fees for established registration and information services be set by statutory instrument. Therefore, charges for the most widely used electronic registration services are included in the regulations. Previously, those fees were set administratively under section 708(5) of the Companies Act 1985.
As a trading fund, Companies House cannot be a burden on the general taxpayer and must recover the full cost of the services that it provides to companies, LLPs and the public from fees charged for delivering those services. The cost base for Companies House has increased with the rising work load and changes in customer practice and demand. The fees regulations reflect that, and the overall effect is to raise income to meet the increased costs of providing Companies House services. However, I am pleased to say that many fees for searching company information have been reduced or held at the same level, along with most registration fees, although three of those have increased.
Companies House cannot consult its customers on the proposed fee changes, because by law the fees are based on the cost of delivering each service. However, the Companies House policy for any price change is always to practise good housekeeping in financial terms. It will give its customers more than 12 weeks' notice of the impending changes before they come into effect. That is to allow customers time to complete any system or organisational changes before implementation. Companies House is not allowed to charge higher fees for one service in order to subsidise another. It is confident that the prices in the regulations are based on a proper consideration and allocation of the cost incurred in providing the services.
The main changes in fees are as follows. Differential fees will be introduced for the incorporation of companies, with a fee reduction of £5 to £15 for incorporation carried out electronically. The fee of £20 for paper incorporation remains unchanged. There will be an increase in the fee payable in respect of the annual return filed on paper for companies from £15 to £30, but the existing £15 fee for annual returns filed electronically will be kept.
Mr. Stephen Pound (Ealing, North) (Lab): A look of horror passed across my hon. Friend's face when I stood up, but I want to make only a small point. Paragraph 11 of schedule 4 refers to a £2 fee for an e-mail transmission, but surely the cost of administering a £2 fee would be more than £2. Is this not an opportunity either to increase the fee massively and increase the revenue to the Exchequer, or to be noble and waive it altogether? Is it really worth collecting £2?
Mr. Sutcliffe: I am grateful to my hon. Friend for his intervention. My look of horror was not aimed at him personally. I will reflect on his point during my speech and may answer it in due course.
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I was setting out the main changes in the amounts of fees. There will be an increase in the fee payable with the annual accounts for overseas companies from £15 to £30. There will be a decrease in the current, generally higher, fees applying to limited liability partnerships to the equivalent lower fees applying to companies; for example, the incorporation fee for LLPs will be reduced from £95 to £20, and the annual return fee will decrease to £30. The charge registration fee for companies and LLPs will increase from £10 to £13. The cost of same day premium services will decrease £30, from £80 to £50. Such services include company and LLP incorporation, change of company and LLP name, re-registration of a company, and the provision of certified copies and extracts from both companies and LLPs.
There will be a new same day electronic incorporation service for companies set at £30—a saving of £20 on the non-electronic same day service. Subscription fees to the electronic service, Companies House Direct, will decrease, with the initial sign-on fee of £50 abolished and the monthly subscription payment reduced from £7.50 to £5. The price of company and LLP documents provided electronically will decrease by an average of 50 per cent., and there will be a simpler pricing structure; for example, all electronic downloads of copy documents and reports will be priced at £1—current prices range from £1 to £5.
The benefits of electronic services are clear in cost and efficiency terms. They are cheaper to administer, they reduce bureaucracy, they are more efficient for users and Companies House, and they are more convenient and generally more secure. Companies House sees that method of delivery as the most efficient way forward. To that end, it is set to enhance and transform its electronic services over the next three years, which is in line with Government policy.
Companies House concedes, however, that concerns may be raised by those involved in company registration because the fee payable with the annual return is set to increase. In response to that, I emphasise that there will be no increase for companies that file their return electronically. The reasons behind the increase in the fee payable with the annual return are to some extent due to the changing environment in which an expanding and dynamic business such as Companies House operates. Companies House has a successful track record of providing a good service to its companies at prices that compare favourably with those in other countries.
In 1996, when the annual return fee was reduced to £15, 1.2 million companies were on the register, filing 3.8 million documents each year. Today, there are 2 million companies filing 6.5 million documents—an increase of about 60 per cent. Each document received manually by Companies House is examined for completeness before being registered on a company record. That labour-intensive process is covered by the fee payable on delivery of an annual return. The cost of maintaining the company record and the register is also included in the fee.
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For the past eight years, Companies House has avoided increasing the fee for filing an annual return. It achieved that mainly by making step changes in efficiency, such as closing the microfiche library in London and its regional offices and by creating electronic images or documents, which enabled the updating of microfiche records to cease altogether in December 2002.
To increase productivity further, Companies House is undergoing an ambitious change programme to modernise IT systems, which will generate future processing efficiencies and deal with unprecedented increases in work load. It will also ensure that Companies House meets the target for electronic filing laid down in Parliament. Greater dependence on and use of electronic services means that the computer systems of Companies House must be robust and resilient.
I turn now to the significant price reductions for company and LLP information, which will benefit the millions of users who access company information electronically. Companies House has been able to reduce its prices because the provision of information electronically has become the preferred choice for customers in more than 95 per cent. of requests. The increase in volume of such requests allows the costs to be spread more widely, and the ending of microfiche production on 31 December 2002, as well as the accessibility of almost all company documents by image, means that the cost of providing information has reduced. As a result, Companies House can offer savings to all its electronic users, while still adhering to the cost recovery principles.
The steps Companies House has taken to improve efficiency and service to customers will deliver a transformation in the way that customers do business with the agency by dramatically increasing the take-up of electronic services, which will bring further efficiencies in processing transactions and deliver a continuing, effective and efficient response to ever-increasing volumes of business. They will provide a high-capacity, robust IT structure and modern mainframe systems to offer greater resilience and increased flexibility for future changes in services.
From 2008, Companies House believes that those measures will all lead to substantial savings, which will be passed on to customers. In our view, the regulations are compatible with the European convention on human rights, and I hope that my explanation of them has been helpful.
2.41 pm
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