Although a deal between the UK and EU remains the most likely outcome of Brexit negotiations, the UK Government has nonetheless prepared and published technical notices in relation to accounting and audit in the event of no deal on the 29 March 2019.
One of the most important take homes from the guidelines is that although the rules surrounding audits of UK companies operating solely in the UK remain unchanged, there will be additional requirements for UK companies operating cross-border.
The notice goes on to say that “certain exemptions in the Companies Act 2006 (CA 2006) relating to the preparation of individual accounts will no longer be extended to companies with parents or subsidiaries incorporated in the EU”.
EU-adopted IFRS continue to be applied to UK listed companies and the UK will unilaterally provide a transitional period in the field of audit until the end of 2020. This will give auditors time to apply for a qualification recognised in the UK and or undertake an aptitude test.
Accounting and corporate reporting
UK incorporated subsidiaries and parents of EU businesses will continue to be subject to the UK’s corporate reporting regime. However certain exemptions in the Companies Act 2006 relating to preparation of individual accounts will no longer be extended to companies with parents or subsidiaries incorporated in the EU.
For example, a UK company is exempted from having to prepare individual accounts if it is dormant, and part of a group of an EU parent company that prepares group accounts. This will only apply if the parent company is in the UK.
UK businesses with a branch operating in the EU will become third country businesses and will be required to comply with specific accounting and reporting requirements for such businesses in the Member State in which they operate. Complying with the Companies Act 2006 may no longer be enough to satisfy the relevant member state’s requirements.
Any subsidiary and parent of EU companies established in the UK will need to make themselves familiar with the exemptions in the Companies Act 2006 which will no longer be extended such as certain exemptions to prepare group accounts.
Branches of EU companies established in the UK will also become subject to additional requirements under the overseas company’s regime similarly to non-EU companies that have branches here and there may be further disclosures to companies house required.
Clearly post Brexit clients with overseas interest need to find out, in their specific circumstances, the rules which impact accounts preparation and their need for an audit.
If you would like to discuss any of the above, then please contact Gerry.firstname.lastname@example.org.