Guidance

Accounting if there's no Brexit deal

How companies can comply with UK accounting and reporting requirements after the UK leaves the EU.

If the UK leaves the EU without a deal, there will be some changes to the UK’s corporate reporting regime. These changes will affect a small number of companies.

Actions for UK incorporated companies and groups

The following information is for individual companies incorporated in the UK or groups of companies where the parent company is incorporated in the UK.

Preparing annual accounts using international accounting standards (IAS)

You will need to use ‘UK-adopted IAS’ rather than ‘EU-adopted IAS’ for financial years beginning after 31 October 2019.

You can continue to use EU-adopted IAS when preparing your accounts for financial years beginning on or before 31 October 2019 but ending after that date.

Operating as a UK company with cross-border presence in the EEA

The corporate reporting requirements of the UK’s Companies Act 2006 will not be deemed automatically equivalent to the EU’s Accounting Directive. This means UK reporting requirements (such as UK GAAP) may no longer be considered equivalent to the reporting requirements of EEA countries.

If you are a UK incorporated parent company with a subsidiary based in the EEA you need to check the relevant reporting requirements in the EEA state where the subsidiary is based.

If you are a UK company with an EEA presence, for example, a branch, you will also need to check the relevant reporting requirements in the EEA state where you have a presence.

Operating as a UK public company with UK listing

Accounting-related changes in the Transparency Directive (TD) and Prospectus Directive (PD) framework, will affect the way companies raise capital and obtain or continue to trade securities on a regulated market.

UK incorporated groups with securities admitted to trading on a UK regulated market will be required to:

  • continue to use accounts prepared using EU-adopted IAS for all accounting periods starting before 31 October 2019 for the TD and PD – you won’t need to restate those accounts or filings retrospectively
  • prepare accounts using UK-adopted IAS for all accounting periods beginning after exit day

Operating as a UK public company with EEA listing

UK incorporated groups that issue debt from a subsidiary incorporated in the EU that is admitted to trading on an EU regulated market, or itself maintains an admission to trading within the EU will need to ensure it continues to:

  • comply with EU local regulatory provisions; this may include the need to publish accounts using EU-adopted IAS or IAS as issued by the International Accounting Standards Board for the subsidiary, for the parent company or for the whole group for listing in the EU
  • produce accounts in accordance with the UK Companies Act 2006 for domestic filing purposes

Audit committees

All UK Public Interest Entities (banks, building societies, insurers and issuers of securities that trade on UK regulated markets) will still be subject to the Disclosure and Transparency Rules issued by the Financial Conduct Authority (FCA), and other rules issued by the Prudential Regulation Authority (PRA).

This requirement originates from the Audit Directive and will still apply subject to 2 important changes:

  1. UK issuers of shares or debt securities that are only admitted to trading on EEA regulated markets will no longer be subject to this framework.
  2. The current exemption for those businesses with a parent that is also subject to the same Audit Directive requirement will continue to apply, but only where the parent is incorporated in the UK. For subsidiaries that are issuers of securities on UK regulated markets the parent may be subject either to the FCA’s or the PRA’s rules. However, for subsidiaries that are banks or insurers and qualify under the more limited exemption provided by the PRA, the parent must be subject to the PRA’s rules.

Appointing auditors

If you are a UK company, you will still need to appoint a UK registered audit firm. It will then be for an individual UK registered auditor to sign the audit report on behalf of the firm when it is due.

However, some rules relating to approving individuals and firms for registration as auditors will change. To find out more read the guidance on auditing if there’s no Brexit deal.

Actions for EEA companies and groups

The following information is for individual companies incorporated in the EEA or groups of companies where the holding company is incorporated in the EEA with some cross-border presence or listings in the UK.

Operating as an EEA company and group with cross-border presence in the UK

After the UK leaves the EU, EEA companies with a UK incorporated subsidiary won’t be eligible for certain exemptions from preparing and filing accounts.

For example, an intermediate UK parent company with an immediate EEA parent may no longer be exempt from producing group accounts. These companies may need to prepare group accounts and file them with Companies House, in accordance with the Companies Act 2006.

In addition, UK registered dormant companies with EEA parents will be required to prepare individual annual accounts for accounting periods beginning after 31 October 2019 and file these with Companies House.

Other exemptions that will be removed for financial periods beginning after 31 October 2019 relate to exemption from producing the non-financial information statements and alteration of accounting reference dates.

Check the latest Companies Act requirements and familiarise yourself with the changes explained in the:

Operating as an EEA public company with UK listing

If you are an EU incorporated group that issues debt or any other securities, which are admitted to trading on a UK market, you will continue to be able to use accounts prepared in accordance with EU-adopted IAS under the UK TD and PD.

Auditing EEA companies that issue securities that are admitted to trading on a UK regulated market

EEA companies that issue securities that are admitted to trading on a UK regulated market will need to:

  • make sure that their EEA auditor is registered either as a statutory auditor in the UK, or as a third country auditor on the register maintained by the Financial Reporting Council (FRC)

This will apply for all accounting years beginning on or after 31 October 2019.

EEA companies that are audited by UK auditors and audit firms that are also registered as auditors in EEA States

It is possible that UK auditors’ and audit firms’ existing registrations as EEA auditors and audit firms will not be valid. If you are an EEA company and think you could be affected, discuss this with your auditor so they can consult the relevant EEA country’s competent authority.

Further information

Accounting and Audit if there’s no Brexit deal: letters to the sector

Published 24 May 2019