Brexit Bulletin, 15 October 2018

Oct 15, 2018

A big week in Brexit looms particularly after last-attempt talks in Brussels failed to progress ahead of this week’s European Council summit where a draft deal was expected to be signed off.  In a development that might interest members, the UK released a paper on Friday which covers accounting and audit if there’s a no deal Brexit. Worth a read.

A refusal to sign

UK Prime Minister Theresa May refused to sign off on a draft agreement reached by her negotiating team because it would mean the UK would have to stay within the EU Customs Union indefinitely.  While reports are sketchy in terms of the detail of the draft agreement, EU chief negotiator Michel Barnier tweeted that despite “intense” last minute efforts, agreement was not reached on the backstop to avoid a hard border. 

Reports emerged last night that the main sticking point was that the UK refused to agree to the EU’s backstop plan (where Northern Ireland would effectively stay aligned to EU rules) unless it had a definite end date.  This is needed to ensure that Theresa May has the support of the DUP and other pro-Brexit ministers. And there were rumours circulating that the EU were willing to compromise on the backstop plan to ensure the UK Prime Minister got the backing of her party in order to reach a deal by the end of the month.

The UK’s concerns mean that all further Brexit talks are suspended until Wednesday when Theresa May will travel to Brussels to meet other EU leaders at the summit.

This latest development means that there’s almost no chance of an outline of an exit deal being discussed at this week’s summit. However there is still a chance that a summit in November might go ahead to progress talks.

Audit qualification – will you be recognised?

The UK continued to release a raft of papers to deal with a no-deal Brexit on Friday. One of the papers; entitled Accounting and Audit if there’s no Brexit deal might be of interest to members.

The paper says that the UK government will ensure that as far as possible the same laws and rules that are currently in place will continue to apply. 

Specifically for corporate reporting, the regime will remain unchanged aside from necessary changes to reflect that the UK is no longer an EU Member State.

In the area of audit, as expected, there will be additional requirements when it comes to carrying out the audits of UK companies that operate cross border.  In the event of a no-deal, the UK will provide a transitional period until the end of December 2020. During this period individuals can continue to apply for their EU audit qualifications to be recognised in the UK and vice versa.  More detail of this is provided in the paper.

In order to sign audit reports on behalf of an audit firm approved in the UK, the auditor must have an audit qualification that is recognised in the UK.  Individuals with EU qualifications may need to sit an aptitude test in the UK to have their qualifications recognised and this, the paper says, should be done during the transition period.   At the end of the transition period however, EU auditors will cease to benefit from automatic recognition of their qualifications in the UK and may no longer be offered an aptitude test.  The paper is silent on what happens in these situations.

Auditors with Irish qualifications will not need to take an aptitude test as the Republic of Ireland uses audit qualifications granted by UK qualifying bodies.

For UK auditors, the paper says “In a ‘no deal’ scenario an individual’s UK audit qualification may no longer be recognised in an EU Member State. There are exceptions such as Ireland where qualifications used are those offered by UK qualifying bodies and so they will continue to be recognised as professional qualifications. Similar arrangements may apply for some UK qualifications in some other Member States.”

It’s important to note that these provisions are only in the case of a no deal Brexit. We will continue to update members of developments in this area as they become clearer. 

Read all of our Brexit updates and Back to Brexit Basics on the dedicated Brexit section of our website.