Catalyst Care Limited has become the first company to be successfully prosecuted by Ofsted for operating as an unregistered children’s home. The company and two directors pleaded guilty to 30 offences under the Care Standards Act, and were fined a total of £92,400 plus costs of over £17,000. The two directors were also disqualified from carrying on and/ or managing or having a financial interest in a children’s home.

This prosecution is likely to be the first of many, with Ofsted’s 2025/ 26 annual report making clear its intention to crack down on unregistered children’s homes, of which it estimates there may be in excess of 700. This focus coincides with Ofsted’s new and additional civil penalty powers under the Children’s Wellbeing and Schools Act 2026.

Individual cases will be fact-sensitive, given that there is a difference between a provider being given an explicit assurance by Ofsted and operating on that basis; and a provider gaming the system and intentionally exploiting the loophole. Whereas previously there may have been isolated instances of Ofsted providing assurance to a provider absent of a formal registration, the prosecution of Catalyst Care Limited does no more than definitively state the law: providers must not operate a children’s home solely on the basis that an application has been made to Ofsted – the registration process must be completed before the home can open. To do otherwise is to operate illegally.

A trend with other social care regulators over recent years, particularly the CQC, has been a clear preference for use of civil enforcement powers, rather than the cost and time involved in criminal proceedings. Whilst prosecutions do have a deterrent effect and can be widely reported, civil sanctions usually have a more immediate and practical impact on providers and we anticipate that over the coming years, we will see Ofsted use its civil enforcement powers more frequently, whilst reserving its criminal enforcement/ prosecution powers for more extreme or high-profile cases.

Advice for providers

The legislation is clear that operating an unregistered children’s home is illegal. Whilst historically there may have been some instances of Ofsted permitting a home to operate, to possibly account for resource and delays within Ofsted in processing applications for registration, that approach is now no longer tenable. Ofsted is aware of the loophole and is taking steps to close it.

Regardless of assurances which may have been made in the past, it remains illegal to operate a children’s residential home absent the appropriate registration being in place. Any provider doing so risks enforcement action, and individuals operating such homes risk disqualification as directors.

Providers must also ensure that they have appropriate insurance cover in place, before they commence in operation. It is not possible to insure an unlawful act or business, therefore were a provider to commence operating as a children’s home absent the correct registration, this would likely invalidate their insurance were any claims to be made on the policy during that period of non-registration. It may be a condition precedent of effective indemnity that providers can demonstrate they have made the necessary application to Ofsted for registration. Catalyst Care Limited had, it is understood, been notified over a period of several years by Ofsted that it was operating illegally, yet it appears no meaningful steps were taken to register the business.

In light of Ofsted’s stated crackdown providers must ensure that they obtain the necessary registration for the activities undertaken, and cease operating in circumstances where that registration is not in place.

Bill Dunkerley is an associate partner in Pannone’s regulatory team