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UK government publishes a "no deal technical notice" on accounting and audit

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17 Oct 2018

The government has published a “no deal technical notice” on accounting and audit, setting out changes to the UK’s corporate reporting and audit frameworks if there is no deal between the UK and the EU over the terms of the UK’s exit from the European Union on 29 March 2019. It does not provide details of the frameworks if a deal is reached, which would apply after the end of an implementation period on 31 December 2020 – during that period existing laws and regulations would apply.

Accounting and corporate reporting

Many aspects of the UK framework will be unchanged. However:

  • Certain exemptions for UK companies which are reliant on having a parent in the EEA (primarily the exemption from the requirement for a UK dormant company to prepare and file accounts if it is guaranteed by its parent company) will be restricted to companies with a UK incorporated parent.
  • UK businesses operating in the EEA may need to register branches or places of business in the relevant EEA state and comply with that state’s overseas companies reporting regime.
  • EEA businesses with a branch or place of business in the UK will need to comply with the UK overseas companies registration and reporting regime. Details can be found in Companies House guidance.
  • UK companies admitted to trading on a regulated market in one of the remaining EEA member states may need to formally demonstrate compliance with International Financial Reporting Standards (IFRS Standards) as issued by the International Accounting Standards Board (IASB).

Auditing 

Individuals qualified as an auditor in an EEA member state will have until December 2020 if they wish to obtain a UK audit qualification by taking an aptitude test (as opposed to requalifying in the UK). This does not apply to Irish individuals as Irish professional qualifications are recognised by UK law. During this same period, individuals with an EEA audit qualification will count towards the control rules for audit firms; after December 2020 only non-UK or Irish qualified individuals already in place at that date will count.

Auditors of EEA incorporated companies admitted to trading on a UK regulated market will need to register with the UK Financial Reporting Council (FRC) and may be subject to inspection by the UK FRC unless the UK authorities determine that the relevant EEA state’s audit regulatory regime is equivalent to that in the UK. Likewise UK auditors of UK companies admitted to trading in an EEA member state are likely to need to register in that state.

A copy of the technical notice is available on the Department for Business, Energy and Industrial Strategy (BEIS) website.

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