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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), ), 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.

There are a number of changes 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 have been made by the government.  These instruments amend retained EU law and EU-derived domestic legislation to address deficiencies and ensure that the law continues to operate effectively after IP completion day. They take effect from IP completion day, although in many cases transitional provisions exist such that changes take 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 take effect for the first time 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, for periods beginning on or after 1 January 2021, UK companies required or choosing to apply IFRS Standards must comply with UK-adopted IFRS Standards.  UK-adopted IFRS Standards comprise IFRS 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 Department for Business, Energy and Industrial Strategy (BEIS) and the Financial Reporting Council (FRC) jointly published updated letters to audit firms and companies setting out changes to the UK’s corporate reporting framework after the end of the transition period.  The FRC has published separate guidance for accountants and auditors on the basis of preparation of annual reports prepared under IFRS Standards where the year-end or accounts approval period straddles 31 December 2020. This is particularly relevant for companies subject to Chapter 4 of the FCA’s Disclosure Guidance and Transparency Rules. 

The FRC has 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

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