Brexit White Paper: 7 key issues for accountants
David Wood explains the potential impact that the Government’s Brexit White Paper, published on 12 July, will have on the profession.
At last, the Government has published its White Paper on ‘The future relationship between the United Kingdom and the European Union’.
Here’s a summary of the impact this could have on accountants.
The UK is proposing new arrangements for services and digital which would provide regulatory flexibility, which is important for the UK’s services-based economy.
However, this means that the UK and the EU will not have current levels of access to each other’s markets.
The UK’s proposal builds on the principles of international trade and the precedents of existing EU trade agreements and reflects its unique starting point. It would include:
- general provisions to minimise barriers to the establishment, investment and the cross-border provision of services;
- a system for the mutual recognition of professional qualifications, enabling professionals to provide services across the UK and EU;
- additional, mutually beneficial arrangements for professional and business services; and
- a new economic and regulatory arrangement for financial services (see below).
2. Mutual Recognition of Professional Qualifications
The current EU regime for the recognition of professional qualifications enables UK and EU professionals to practise across both the UK and the EU on a temporary, longer-term or permanent basis, without fully having to retrain or requalify.
Since 1997 the UK has recognised over 142,000 EU qualifications, including for lawyers, social workers and engineers. Over 27,000 decisions to recognise UK qualifications have been undertaken in the EU.
The UK wants the future UK-EU partnership to include provisions on the recognition of professional qualifications, noting particular relevance for the healthcare, education and veterinary/agri-food sectors in the context of North-South cooperation between Northern Ireland and Ireland.
The White Paper proposes establishing a system that:
- is broad in scope, covering the same range of professions as the Mutual Recognition of Qualifications Directive;
- includes those operating either on a permanent or temporary basis across borders;
- is predictable and proportionate, enabling professionals to demonstrate that they meet the necessary requirements, or to undertake legitimate compensatory measures where there is a significant difference between qualifications or training; and
- provides transparency, with cooperation between regulators to facilitate the exchange of information about breaches of professional standards, and to review changes to professional qualifications over time.
3. Cross-Border Provision of Professional Services
The UK and EU economies rely on the cross-border provision of professional services. This includes accounting and audit services; in 2016, UK firms provided over 14% of EU27 audit and accountancy imports.
The White Paper proposes supplementary provisions for professional and business services, for example, permitting joint practice between UK and EU lawyers, and continued joint UK-EU ownership of accounting firms.
The supplementary provisions would not replicate Single Market membership, and the rights of professional and business service providers in the UK and the EU would be less extensive than currently.
4. Mobility Framework
The new mobility framework will enable UK and EU citizens to continue to travel to each other’s countries, and (importantly for the profession) businesses and professionals to provide services:
The UK’s future economic partnership should, therefore, provide reciprocal arrangements, consistent with the ending of free movement, which:
- support businesses to provide services and to move their talented people;
- allow citizens to travel freely, without a visa, for tourism and temporary business activity;
- facilitate mobility for students and young people, so they can benefit from world leading universities and the cultural experiences the UK and the EU have to offer; and
- are as streamlined as possible to ensure smooth passage for legitimate travel while strengthening the security of the UK’s borders.
Specifically, the UK wants reciprocal arrangements that would allow UK nationals to visit the EU without a visa for short-term business reasons and equivalent arrangements for EU citizens coming to the UK.
The UK also wants to agree reciprocal provisions on company transfers that allow UK and EU-based companies to train staff, move them between offices and plants and to deploy expertise within the UK and EU where it is needed.
5. Financial Services
The White Paper proposes new economic and regulatory arrangements for financial services, to preserve the mutual benefits of integrated markets and protect financial stability, while respecting the right of the UK and the EU to control access to their own markets.
This is essentially some form of ‘equivalence’ arrangement, which does not go as far as ‘mutual recognition’. These arrangements will not replicate the EU’s passporting regimes.
Accepting regulatory flexibility, however, inevitably means less access to the EU market. This has not been well received by the financial services sector.
6. Audit & Accounting
Probably as a result of the recent collaborative work of the firms and professional bodies, audit and accounting is covered under a specific section (section 1.7.9) of the White Paper.
This recognises that:
- UK and EU companies benefit from shared accounting standards and accounting and audit regulatory frameworks – which facilitate access to capital markets, foster investor confidence, and facilitate the cross-border provision of accounting and audit services; and
- there are numerous precedents between the EU and third countries for audit equivalence and adequacy, and accounting equivalence – and proposes that the UK will seek EU equivalence and adequacy decisions under the EU’s third country regimes by the end of the implementation period.
7. Data Protection and Other Liaison
The Government also wants the future relationship with the EU to include other areas of cooperation which are of vital importance to the UK and the EU:
- protection of personal data – ensuring the future relationship facilitates the continued free flow of data to support business activity and security collaboration; and
- co-operative accords for science and innovation, culture and education, development and international action, defence research and development, and space, so that the UK and the EU can continue to work together in these areas, with the UK making an appropriate financial contribution.