The lawful purpose statement

Q: How does this play out in practice?

Illustration only. An accountancy practice files confirmation statements for 300 small company clients. Before each filing it sends the director a short checklist covering changes to officers, people with significant control, shareholders, the registered office, the registered email address and the intended future activities. For 297 clients the director confirms nothing has changed and the business remains lawful, and the practice files with the statement. One client says it is about to start an activity it believes may need a licence. The practice asks the director to confirm the licence position before filing, because the statement looks forward. Two clients do not respond. The practice does not file on their behalf by default; it chases them, because the filing deadline is 14 days after the end of the review period and the statement is the client's to make.

Q: What are the common mistakes?

Treating the statement as a formality. It is a statement to the registrar, and the false statement offences in sections 1112 and 1112A apply to it. Filing for a client without asking. An agent who files a confirmation statement is delivering the client's statement and should be able to show the client confirmed it. Forgetting dormant companies. Every company, including dormant and non trading companies, must file a confirmation statement at least once a year, and the lawful purpose statement goes with it. Assuming the statement is only needed on incorporation. It is repeated every year and speaks to the company's intended activities from that point. Ignoring wider exposure. A false statement charge is not the only risk where a company is used for unlawful activity. Directors should also be aware of disqualification and of the corporate failure to prevent fraud offence. Companies House can also use its powers to query and remove information. Company directors can protect the business against the cost of an HMRC check with tax investigation insurance, which pays up to £100,000 of accountant's fees with Solar Protect. Read how our cover works or get a quote.

Since 4 March 2024 the people forming a company must state in the incorporation application that they wish to form it for lawful purposes, and every confirmation statement must be accompanied by a statement that the company’s intended future activities are lawful. Both are statements made to the registrar, so a false one can be a criminal offence, and the annual statement cannot be skipped because a confirmation statement is incomplete without it.

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What does the law actually require?

There are two separate statements, both added to the Companies Act 2006 by the Economic Crime and Corporate Transparency Act 2023.

On incorporation. Section 9(2)(e) says the application for registration must state that the subscribers wish to form the company for lawful purposes. Companies House’s incorporation guidance puts it the same way: one or more people form a company by subscribing their names to a memorandum of association and stating that they wish to form the company for lawful purposes.
Every year after that. Section 853BA says that where a company makes a confirmation statement, it must at the same time deliver a statement that the intended future activities of the company are lawful.

The first statement looks at why the company is being formed. The second looks forward from each confirmation date and is made by the company itself, through whoever files the confirmation statement on its behalf.

When did the statements start?

Both provisions came into force on 4 March 2024. The incorporation statement applied to applications from that date. For the annual statement, regulation 5 of the commencement regulations (SI 2024/269) says the duty first applies on the first confirmation statement with a confirmation date after the day section 60 of the 2023 Act came into force. In practice that means any confirmation statement with a confirmation date from 5 March 2024 onwards.

The duty in section 853BA is also applied to limited liability partnerships, with modifications, by the LLP regulations, so LLP confirmation statements carry an equivalent statement.

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Why does the statement have legal teeth?

A company’s confirmation statement under section 853A(1)(b)(ii) confirms that the company is delivering, at the same time, any information required by sections 853BA to 853H. The lawful purpose statement is one of those. If it is missing, the company has not delivered a complete confirmation statement. Companies House guidance on confirmation statements states that you need to state that the intended future activities of the company are lawful.

Failing to deliver a confirmation statement within 14 days after the end of the review period is an offence by the company and every officer in default under section 853L. GOV.UK guidance also warns that a company can be fined up to £5,000 and may be struck off if it does not file.

The bigger exposure is a false statement. Section 1112 makes it an offence, without reasonable excuse, to make a statement to the registrar that is misleading, false or deceptive in a material particular. Section 1112A makes it an aggravated offence to do so knowingly, punishable on indictment by up to two years’ imprisonment, a fine or both. A director who ticks the lawful purpose box while knowing the company is being used for fraud, money laundering or other unlawful activity is making exactly that kind of statement.

What does “lawful” cover?

Neither section 9 nor section 853BA defines “lawful purposes” or “lawful” activities. The words take their ordinary meaning: the company is not being formed for, and does not intend to carry on, activities that break the law.

The statement sits alongside the registrar’s fourth statutory objective in section 1081A, which is to prevent companies and others from carrying out unlawful activities or facilitating the carrying out of unlawful activities by others. The statement does not ask directors to certify that the company has never breached any rule. It is about intended activities and the purpose of the company, and it is a statement of the directors’ honest position at the time.

That still requires some thought. A director should not sign off the statement if they know the business model depends on something unlawful, such as trading without a required licence or authorisation, or if they know the company is being used as a vehicle for fraud. Where a company has had a regulatory problem that has since been put right, the forward looking wording is relevant: the question is whether its intended future activities are lawful.

Who should make the statement and how?

On incorporation, the statement is part of the application whether it is filed online, through software or on paper form IN01; see how to incorporate a company. If an agent forms the company, the statement is still the subscribers’ statement, so a formation agent should confirm the purpose with the client rather than assume it.

On the confirmation statement, the statement is included in the filing itself. Accountants and company secretarial agents often file confirmation statements for many clients in one sitting. That makes it easy to treat the lawful purpose tick as routine, but the agent is delivering a statement to the registrar and should have the client’s confirmation.

How does this play out in practice?

Illustration only. An accountancy practice files confirmation statements for 300 small company clients. Before each filing it sends the director a short checklist covering changes to officers, people with significant control, shareholders, the registered office, the registered email address and the intended future activities.

For 297 clients the director confirms nothing has changed and the business remains lawful, and the practice files with the statement.
One client says it is about to start an activity it believes may need a licence. The practice asks the director to confirm the licence position before filing, because the statement looks forward.
Two clients do not respond. The practice does not file on their behalf by default; it chases them, because the filing deadline is 14 days after the end of the review period and the statement is the client’s to make.

What are the common mistakes?

Treating the statement as a formality. It is a statement to the registrar, and the false statement offences in sections 1112 and 1112A apply to it.
Filing for a client without asking. An agent who files a confirmation statement is delivering the client’s statement and should be able to show the client confirmed it.
Forgetting dormant companies. Every company, including dormant and non trading companies, must file a confirmation statement at least once a year, and the lawful purpose statement goes with it.
Assuming the statement is only needed on incorporation. It is repeated every year and speaks to the company’s intended activities from that point.
Ignoring wider exposure. A false statement charge is not the only risk where a company is used for unlawful activity. Directors should also be aware of disqualification and of the corporate failure to prevent fraud offence. Companies House can also use its powers to query and remove information.

Company directors can protect the business against the cost of an HMRC check with tax investigation insurance, which pays up to £100,000 of accountant’s fees with Solar Protect. Read how our cover works or get a quote.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.