Brexit Bulletin, 19 October 2018

Oct 18, 2018

EU leaders have agreed that not enough progress has been made in the Brexit talks to require a special Brexit summit next month.  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. It’s

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Nothing new

The UK Prime Minister Theresa May addressed the EU27 leaders at the start of the EU Summit and it reportedly only took fifteen minutes for the leaders to establish that there was nothing new to justify allowing talks to progress.  It had been hoped that some form of agreement could be reached on the Irish border backstop by November but unfortunately time seems to have run out.

Now it seems the UK must to go back to basics and come up with some sort of solution to the Irish backstop impasse.  Reports have emerged that the UK Prime Minister is considering an extension to the transition period, which is already due to last 21 months and will keep the UK tied to EU rules until 31 December 2020.  The UK has rejected the EU’s proposal to avoid a hard border on the island of Ireland by keeping Northern Ireland within the EU’s Single Market as this puts a border between Northern Ireland and the rest of the UK.   

Extending the transition period might make it less likely that the backstop will ever be implemented as a customs deal might be agreed during that time.  But at what price might that come at?  

Audit qualification – will you be recognised?

The UK continued to release a raft of papers to deal with a no-deal Brexit last week. 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.