The UK’s withdrawal from the European Union

Under the European Union (Withdrawal) Act 2018, the UK ceased to be a member of the EU on 31 January 2020 ('exit day'). Under the withdrawal agreement, enacted in UK law by the European Union (Withdrawal Agreement) Act 2020 (WAA 2020), ), this was followed by an implementation period (IP), which ended on 'IP completion day', defined as 31 December 2020 at 11.00 p.m. UK time), this was followed by an implementation period (IP), which ended on 'IP completion day', defined as 31 December 2020 at 11.00 p.m. UK time.

A number of changes were made to the UK’s accounting, corporate reporting, auditing and corporate governance regimes after the end of the transition period. These changes are reflected in a number of statutory instruments which were made by the government. These instruments amended retained EU law and EU-derived domestic legislation to address deficiencies and ensured that the law continued to operate effectively after IP completion day. They took effect from IP completion day, although in many cases transitional provisions existed such that changes took effect only for financial years beginning after IP completion day (i.e. beginning on or after 1 January 2021). 

The key corporate reporting changes which took effect for periods beginning on or after 1 January 2021 affect:

  • the exemption from audit (and, if a dormant company, from preparing and filing accounts) for subsidiaries whose liabilities are guaranteed by a parent;
  • the exemptions from preparation of group accounts on the grounds of consolidation into a larger group; 
  • non-financial information statement requirements for large PIEs within their strategic report; and
  • availability of some exemptions such as adoption of the small companies regime (s384 of the Companies Act 2006), the consolidation exemption for small groups (s399), and exemptions for medium-sized companies (s467).

Additionally, from 1 January 2021, UK companies required or choosing to apply IFRS Accounting Standards must comply with UK-adopted IFRS Accounting Standards.  UK-adopted IFRS Accounting Standards comprise IFRS Accounting Standards as endorsed by the EU as at 31 December 2020 and any standards or amendments that have been endorsed by the UK Endorsement Board after that date. 

The FRC issued updates to FRSs 100-105 to reflect changes in the law as a result of the UK’s withdrawal from the EU. The Amendments were limited to those necessary to ensure consistency with UK company law and largely updated legal references and terminology used in the standards. Early application was permitted for UK entities in certain circumstances.  

Correction list for hyphenation

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