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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), there is an implementation period (IP), which ends on 'IP completion day', defined as 31 December 2020 at 11.00 p.m. UK time.

UK reporting continues to be subject to the EU legislative framework until IP completion day. This means that:

  • existing company law relating to accounts and audit continues to apply;
  • companies that are required or choose to adopt IFRS Standards must use IFRS Standards 'as endorsed for use in the European Union', meaning that new or revised Standards cannot be adopted before EU-endorsement; and
  • the FRC remains a competent authority of an EU Member State, tasked with monitoring and supervising compliance with ESMA’s common enforcement priorities, which therefore remain relevant for UK company reporting.

For financial years commencing on or after IP completion day, a new UK adoption mechanism for IFRS Standards will be established. IFRS Standards as adopted by the UK will start from the extant IFRS Standards as adopted by the EU, but there may be later changes and/or differences in the timing of endorsement. UK incorporated entities with securities admitted to trading elsewhere in the EEA may need to confirm they have followed both frameworks.

For financial years commencing on or after IP completion day, changes to Companies Act requirements to reflect the fact that the UK is no longer subject to EU law will take effect. The general principle is that these changes will maintain existing requirements and exemptions in most cases. However, there will be some changes of substance.  For example, exemptions which rely on being part of a group headed by an EEA parent will be available only to entities with a UK parent.  Although the various regulations making these changes still refer to 'exit day' (as they were enacted in contemplation of an exit without a transitional agreement), Schedule 5 to WAA 2020 states that this should be read as IP completion day.

Whilst most of the necessary amendments to legislation have been made, there may be some further changes during the implementation period and it is possible that further changes may result from any agreements reached between the UK and the EU, either as part of a future trade agreement or as a result of equivalence decisions taken under UK and EU law.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.