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

As part of the launch of our annual Care Report, barrister, Jonathan Landau, looks in more detail at the CQC’s new strategy and the likely consequences. 

The care sector is an integral part of the UK’s societal landscape – both in economic terms and the number of vulnerable people it services. With an ageing population – with estimates suggesting a 36% growth in the number of people aged over 85 by 2025 – it’s clear that the sector will only grow in prominence over the coming years. 

The regulatory structure that sits around the sector has been governed by the Care Quality Commission (CQC) since 2009 when the external body was created to regulate and monitor health and social care services in England, taking over the roles and responsibilities of the Healthcare Commission, Commission for Social Care Inspection and Mental Health Act Commission. In bringing together these three predecessor organisations it was (and remains) the CQC’s stated aim to ensure that, “health and social care services provide people with safe, effective, compassionate and high-quality care.”

Initially the CQC inspected and monitored registered care providers in accordance with 16 ‘essential standards’ of quality and safety. However in the years that followed its creation there was, both within the CQC and the wider industry, a perceived lack of understanding as to how the essential standards were applied and interpreted in practice, prompting new ‘fundamental standards of care’ in 2015. To assist in enforcing the required standards, the CQC was given new powers, transforming it from an inspection and monitoring organisation into a regulator with teeth, including not only civil enforcement powers, but also the ability to prosecute those who had failed to meet those required standards.

Roll on six years and the role of the CQC remains a great source of debate. A global pandemic has made a seismic change to the way in which the CQC has pursued its objectives, and earlier this year it introduced a new strategy ‘for the changing world of health and social care’. The aim of the strategy, published in May 2021, is to strengthen the CQC’s commitment to deliver its purpose.

The CQC claims that its aims and role as a regulator won’t change – but how it works will be different. The strategy is based on four themes:

People and communities

Regulation that’s driven by people’s needs and experiences, focusing on

what’s important to people and communities when they access, use and move between services.

Smarter regulation

Smarter, more dynamic and flexible regulation that provides up-to-date and high-quality information and ratings, easier ways of working with the CQC and a more proportionate response.

Safety through learning

Regulating for stronger safety cultures across health and care, prioritising

learning and improvement and collaborating to value everyone’s perspectives.

Accelerating improvement

Enabling health and care services and local systems to access support to help improve the quality of care where it’s needed most.

The ‘smarter regulation’ theme is likely to have the biggest impact on providers, in terms of how they are inspected and rated. There will be a move away from relying chiefly on comprehensive on-site inspections. Instead, the CQC will develop continuous insight and monitoring methodologies. It anticipates that this will enable inspectors to spend more time speaking with people when on site rather than looking at paperwork.

The CQC also plans to develop innovative ways of analysing data and using AI to make decisions. Ratings will be more dynamic and won’t require an inspection for a change in rating.

All of this presents both risks and opportunities. In terms of risks, the validity of the CQC’s judgements will only be as robust as the systems it uses and the data it obtains. Providers, their advisors, and representative bodies will need to scrutinise the methodologies as they develop and quickly raise concerns. It’s likely that AI, for example, will pose some difficulties, with the potential for some very uncomfortable – even discriminatory – decisions for the CQC. Providers will also need to advocate for a fair system of challenging any decisions, as it seems unlikely that the factual accuracy correction procedure will not be available for such a dynamic regulatory scheme. That is particularly important if the CQC is obtaining information from sources it cannot itself verify and if it is making decisions on an AI (read automated) basis.

In terms of opportunities, providers that develop good relationships with stakeholders, and who invest time in understanding the CQC’s methodologies, will be well-placed to achieve good ratings and may benefit from lighter touch regulation. The more developed the CQC’s methodologies are, the easier it will be for providers to ensure that they can provide the evidence to satisfy the independent regulator.  

Currently, the CQC is targeting services with which it has concerns. In many cases, it does not have concerns about homes with lower ratings because of the improvements they have made. That leaves them stuck on lower ratings, because the CQC is not re-inspecting them. The ability for ratings to improve quickly is therefore very welcome.  

The themes of the new strategy are laudable, but it is inevitable that there will be unintended consequences and teething problems as the methodologies develop. Case associations and providers’ trusted advisors will be well-placed to keep them informed as the detail emerges.

Jonathan Landau is a barrister at 5 Essex Court. He has particular expertise in inquests and healthcare regulation. Joanthan is regularly instructed in relation to high profile Article 2 and jury inquests, often in the context of media coverage or regulatory investigations. He advises in respect of a broad range of healthcare regulatory matters including all levels of CQC and Ofsted enforcement, safeguarding investigations, commissioning disputes, contract monitoring, and mental capacity.