Brexit: prepare now for no deal

City of London at twilight Brexit image
David Wood.jpg By David Wood, Senior Policy Director, ICAS

16 October 2018

David Wood provides an update on the UK Government’s preparations for a no-deal Brexit, and highlights the Brexit-related risk disclosures made by Next plc.

No-Deal Brexit Planning

There are now around 75 ‘technical notes’ available which set out what the Government is doing to prepare for a no-deal Brexit and which provide guidance to businesses and citizens on what actions they might need to take.

Although the Government is hoping that it will not be necessary, its approach is to encourage the UK to prepare for a possible no-deal scenario, so as to minimise disruption and ensure a smooth and orderly exit in all scenarios.

Technical Notes cover the following issues:

The Government was originally anticipating publishing around 80 technical notes in total, suggesting that there are only a few further ones to be published.

All of these can be accessed through the above links or on the Department for Exiting the EU’s website.

In the light of the Government’s approach, we suggest that ICAS members refer to the technical notes which are relevant for their businesses and undertake their own appropriate contingency planning.

Technical Note on “Accounting and audit if there’s no Brexit deal”

The UK Government published its Technical Note on “Accounting and audit if there’s no Brexit deal” on 12 October.

The key message on accounting and reporting is that the regime will be unchanged in many respects.  UK incorporated subsidiaries and parents of EU businesses will continue to be subject to the UK’s corporate reporting regime.

However, as the UK will no longer be an EU Member State, certain exemptions in the Companies Act 2006 will no longer apply to companies with parents or subsidiaries incorporated in the EU.

For audit, the Government is intending to unilaterally provide a transitional period to December 2020, during which individuals will continue to be able to apply for their EU audit qualifications to be recognised within the UK.

EU auditor registrations will continue to be recognised in the UK until December 2020.  Furthermore, EU audit firms will continue to count towards the majority of appropriately qualified persons test for ownership of UK audit firms during this period.

The Note does not provide any indication on the likely longer term arrangements for ownership and recognition issues.

Further details are available from the Note itself.

Other Professional Services

A further Technical Note “Providing Services including those of a qualified professional if there’s no Brexit deal” was also published on 12 October.  This covers professional services other than audit, and therefore is relevant for the provision of broader accounting and related services.

After Brexit, the Mutual Recognition of Professional Qualifications Directive will no longer apply in the UK and there will therefore no longer be any system of reciprocal recognition of professional qualifications between EU / EEA States and the UK.

EU / EEA professionals who are already established and who have received a recognition decision in the UK will not be affected: their recognition decision will remain valid.

The UK Government intends to set up a mechanism through which individuals can seek recognition of their professional qualifications in due course.

Disclosures on Brexit Preparations

Next plc has been recently highlighted for the comprehensive disclosure it has made in its half year report to July 2018 on how it has prepared for Brexit, and how Brexit could impact on its prices and on its financial situation.

It includes 10 pages of commentary on the direct risks – including import duties on goods arriving into the UK, additional administrative costs of bringing goods in from the EU, import duties on stock going from the UK into the EU, and compliance with EU standards and regulations of goods sent from the UK.

It also addresses indirect risks arising from the devaluation of sterling and from delays at UK and EU ports.  It is the indirect risk of interruption to the smooth operation of ports which Next sees as the biggest Brexit-related risk to its business.

Topics

  • Business issues
  • Political landscape
  • Brexit

Previous Page