United Kingdom

Guidance

Members will find  pertinent information in the CCAB guidance of 2 March 2022, where CCAB issued a joint statement to the profession following ongoing developments in Ukraine.  This guidance concentrates on our UK based members’ obligations in relation to sanctions, ethical considerations and obligations under AML legislation.

Please also click here for some further information on the Institute’s website .

UK Ban on provision of accounting services.

Following the UK's withdrawal from the European Union, the Russia (Sanctions) (EU Exit) Regulations 2019 (2019 Regulations) replaced the EU sanctions regimes in relation to Russia.

The UK Government Guidance “Complying with professional and business services sanctions related to Russia” (see further below also ) explains that the prohibitions on accounting and auditing services are separate but complementary sanctions. After consultation with regulators and businesses, the UK chose to distinguish auditing and accounting services because of the differences in their regulatory practices and legal obligations in the UK. These services sanctions are also different in respect of which licensing grounds are applicable to them.

The Russia (Sanctions) (EU Exit) (Amendment) (No. 14) Regulations 2022 (“No.14/22 Regulations”) amends the 2019 Regulations and among other matters bring into force the UK's  legislative ban on providing accounting services to Russia as of 21 July 2022. Please click here for the explanatory memorandum to the No.14/22 Regulations.

The Russia (Sanctions) (EU Exit) (Amendment) (No. 17) Regulations 2022 (the No. 17 Regulations) were passed in the UK bringing into effect further prohibitions from 16 December 2022 including a ban on auditing services which was announced in September 2022.

Please click here for a news item which gives further information on the ban and some further useful links.

Please refer to our "Europe & International" sub page for a chart comparing the UK and EU/Irish ban on providing accounting services to Russia.

UK Government guidance (Statutory guidance Russia sanctions: guidance) (see in para 1.4) states that though the accounting and auditing services definitions are based on CPC codes, they are defined in Schedule 3J [inserted by  the No.17 Regulations ] for clarity, given the differences in exceptions and licensing which apply to these two sectors. The definition of accounting services is based on the Provisional Central Product Classification (CPC) Codes 1991 and includes CPC 86212 Accounting Review Services, CPC 86213 Compilation of Financial Statements services, CPC 86219 Other Accounting Services and CPC 86220 Bookkeeping Services, except tax returns. The definition of auditing services is also based on the Provisional CPC Code 1991, CPC 86211 Financial Auditing Services.

The 2019 Regulations (as amended) also contain certain exceptions from the prohibitions imposed  in relation to accounting and auditing services.

Please refer to the UK Government Guidance “Complying with professional and business services sanctions related to Russia” which with the caveat that individual firms must take their own legal advice as to whether their activity falls within scope of the sanctions, also gives guidance on some common audit scenarios.

Finally under this heading, readers should note a news item from Professional Standards Dept. of the Institute of August 23, 2023 where they alluded to awareness of the risk and obligations in relation to sanctioned goods as an important first step for those working in the accountancy profession so that they do not become party to the trade sanctions circumvention. The news item was issued in the context of the summary AML Alert  Russia sanctions – Trade sanctions circumvention which was produced by the Accountancy AML Supervisors’ Group (AASG) from an extract from the UK Department of Business and Trade notice NTE 2023/08: Russia sanctions – Trade sanctions circumvention published 22 May 2023  . 

Competent authorities

What government departments are responsible for implementing and administering sanctions in the UK and some general information in relation to them.

There are a number of responsible departments and bodies in relation to sanctions.

HM Treasury (Office of Financial Sanctions Implementation) OFSI is responsible for implementing financial sanctions. Please click here for the OFSI blog page “Russia: What has changed and what do I need to do?” OFSI has issued Russia Guidance for the financial and investment restrictions in Russia (Sanctions) (EU Exit) Regulations 2019. Some of the guidance has been updated for the 2022 sanctions (apparent from the guidance). You can read further about it here.

OFSI  general guidance for financial sanctions under the Sanctions and Anti-Money Laundering Act 2018 and you can read a copy of the 2022 guidance here.
 
In July 2022 the National Economic Crime Centre (NECC), a multi-agency unit in the National Crime Agency (NCA), and HM Treasury’s Office of Financial Sanctions Implementation (OFSI), issued a red alert on Financial Sanctions Evasion Typologies: Russian Elites and Enablers. The purpose of the alert is to provide information on some common techniques suspected to be used to evade financial sanctions. It lists some indicators of methods being used to evade sanctions and provides some industry recommendations. Read  the NCA news item here  and a useful article from professional firm Steptoe & Johnson LLP on the UK “Red Alert”. Please also click here for an  article from Herbert Smith Freehill which looks at the red alert in more detail.

OFSI issued Guidance on 8 June 2022 on enforcement and monetary penalties for breaches of financial sanctions to reflect changes introduced by the Economic Crime (Transparency and Enforcement) Act 2022 .The  measures and Guidance came into force on 15 June 2022. OFSI  has also published an accompanying blog. (see paragraph above also).

Commonwealth and Development Office (FCDO) is responsible for UK international sanctions policy. The Dept for International Trade carries out  trade sanctions .The Dept for Transport carries out  transport sanctions and the Home Office applies travel bans .

Statutory guidance “Russia sanctions: guidance” has been issued by the UK government and is updated from time to time. You can read about it here.

Readers may find of interest  the House of Commons Treasury Committee  inquiry into Russia: effective economic sanctions which was announced on 3 March 2022. A treasury report on that inquiry is available here. Further information including written evidence and correspondence can be accessed by clicking here. See for example one letter from HMRC which provides an overview of HMRC’s responsibilities regarding trade sanctions.

Legislative provisions

On the legislative side in the UK, the UK Sanctions and Anti-Money Laundering Act 2018 (SAMLA) provides it with a new domestic legislative framework to give powers to impose sanctions after the European Communities Act 1972 was repealed. Among other things it makes provision enabling sanctions to be imposed by the UK where appropriate for the purposes of compliance with United Nations obligations or other international obligations. It also provides for exceptions and licences.

The Russia (Sanctions) (EU Exit) Regulations 2019 (2019 Regulations) were made under SAMLA. Following the UK's withdrawal from the European Union, the 2019 Regulations replace the EU sanctions regimes in relation to Russia. They are aimed at encouraging Russia to cease actions destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine. Under the 2019 Regulations persons who are involved in destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine can be designated and excluded from the UK and made subject to financial sanctions. The 2019 Regulations also impose certain restrictions on trade and restrictions on the provision of services related to that trade and  also impose financial and investment restrictions.

The Russia (Sanctions) (EU Exit) (Amendment) Regulations 2022 were also issued under SAMLA. These Regulations amend the designation criteria in regulation 6 of the 2019 Regulations to specify additional activities for which a person may be designated. It also identifies sectors of “strategic significance” to the Russian Government, including the chemical, defence, energy, extractives, electronics, ICT and financial services sectors. Under the new measures, the UK is now able to target the strategic interests of the Russian state more broadly.

Further regulations have been issued in respect of further sanctions packages issued by the UK. Below is a listing of the regulations made to date in relation to Russian sanctions:

UK Statutory Instrument 123/2022  The Russia (Sanctions) (EU exit) (Amendment) Regulations 2022

UK Statutory Instrument 194/2022  The Russia (Sanctions) (EU Exit) (Amendment) (No. 2) Regulations 2022

UK Statutory Instrument 195/2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2022

UK Statutory Instrument 203 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2022

UK Statutory Instrument 205 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 5) Regulations 2022

UK Statutory Instrument 241 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 6) Regulations 2022

UK Statutory Instrument 395 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 7) Regulations 2022

UK Statutory Instrument 452 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 8) Regulations 2022

UK Statutory Instrument 477 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No.9) Regulations 2022

UK Statutory Instrument 689 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 10) Regulations 2022

UK Statutory Instrument 792 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 11) Regulations 2022

UK Statutory Instrument 801 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 12) Regulations 2022

UK Statutory Instrument 814/2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 13) Regulations 2022.

UK Statutory Instrument 850/2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 14) Regulations 2022.

UK Statutory Instrument 1110/2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 15) Regulations 2022

UK Statutory Instrument 1122/2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 16) Regulations 2022

UK Statutory Instrument 1331/2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 17) Regulations 2022

UK Statutory Instrument 440/2023 The Russia (Sanctions) (EU Exit) (Amendment) Regulations 2023

UK Statutory Instrument 665/2023 The Russia (Sanctions) (EU Exit) (Amendment) (No. 2) Regulations 2023

Please click here  and here to go to Herbert Smith Freehill's sanction tracker pages where you can read analysis of some of the regulations in more detail.

In March 2022 the UK Parliament fast tracked  the Economic Crime (Transparency and Enforcement) Act 2022 (“2022 Act”). Among others are provisions for sanctions in Part 3.It contains amendments to the imposition of monetary penalties under the Policing and Crime Act 2017 ("PCA").Under the PCA, HM Treasury has power to impose monetary penalties for financial sanctions breaches. From 15 June 2022 a monetary penalty can be imposed where a person breached a prohibition or failed to comply with an obligation imposed by financial sanctions legislation. The 2022 Act removed the requirement for OFSI to demonstrate that a person had knowledge or reasonable cause to suspect they were in breach of a financial sanction in order to issue a monetary penalty. This is only in the case of civil not criminal liability. Further, OFSI will still be required to determine whether on the balance of probabilities, a breach or failure to comply with an obligation under sanctions legislation has occurred.

Please click here for a link to an article on the subject which also contains some further links.

Part 3 also contains amendments to the UK's sanctions framework under SAMLA.

One of the provisions gives the UK Government new powers to act in the public interest and designate individuals and entities under an urgent procedure, while evidence is gathered to sanction them under the UK’s own standard procedures. This  has allowed the UK to immediately designate individuals and entities that have already been sanctioned by the EU, US and other allies. 

Please see here for an interesting research briefing from the House of Commons Library  entitled “Sanctions against Russia “which deals with topics such as “The UK sanctions regime prior to 2022” “What prompted fresh sanctions?” and “What sanctions is the UK imposing?”. It also provides narrative around the various regulations adopted by the UK government (listed above ) and examines sanctions regimes against Russia in various other jurisdictions such as the United States and Australia. 

Please  refer to this page which provides a guide  to the current consolidated list of asset freeze targets, and a list of persons named in relation to financial and investment restrictions. It identifies people, entities and ships which are designated or specified under regulations made under the Sanctions and Anti-Money Laundering Act 2018 and the reasons why.

Financial sanctions-reporting obligations

UK financial sanctions legislation sets out specific reporting obligations which requires certain individuals and entities (‘relevant firms’) to report to OFSI (where it came to their  knowledge while carrying out their business). If:

they know or have reasonable cause to suspect that an individual, entity or ship is a designated person; and
If that designated person is a customer, and they hold frozen assets for them: their nature and amount or quantity; or
they know or have reasonable cause to suspect that a person has committed an offence under financial sanctions regulations.

In August 2022 amendments were made which expand financial sanctions reporting obligations to cryptoasset exchanges and custodian wallet providers. Click here for an article by Steptoe & Johnson LLP on the "new UK Sanctions Legislation Expands Mandatory Financial Sanctions Reporting Obligations to Include Crypto Providers" and please also click here for  a webinar new reporting obligations for Cryptoasset businesses that need to comply with UK sanctions.

Click here to access an article by law firm Bryan Cave Leighton Paisner LLP on the two statutory instruments brought into force in August 2022.which extend reporting obligations under the UK’s sanctions regime to cryptoasset businesses; bringing them expressly within the remit of the Office of Financial Sanctions Implementation (OFSI) for reporting purposes.

The UK Government has provided some useful information and guidance on Ukraine  including; 

Please see here for "Welcome: a guide for Ukrainians arriving in the UK".

Homes for Ukraine:

Homes for Ukraine scheme: frequently asked questions. This UK Government page details Questions and answers on how the Homes for Ukraine scheme will work. 

Arrivals from Ukraine: Guidance for claiming Child Benefit

Anyone coming to the UK under the ‘Ukraine Family Support’ or ‘Homes for Ukraine’ scheme is entitled to claim Child Benefit immediately – rather than having to wait for the usual three-month qualifying period. People should complete a CH2 Child Benefit claim form and submit this by post to the Child Benefit office, the address of which can be found on the form.

Claimants should provide an original birth certificate and the passport or travel document used to enter the UK. Where this documentation is not immediately available, people are advised to include a note in their claim and someone from HMRC will be in touch to discuss further. You can find more information on Child Benefit on GOV.UK or call 0300 200 3100 (from inside the UK).

The following information is provided from a circular from the UK's Department for Business, Energy and Industrial Strategy (BEIS):

Businesses can now sign up to offer work to people who have come to the UK from Ukraine. Further information on the process here.  

Customs easement to help Ukraine aid exports. A customs easement is now in place making it easier to move aid and donations to help the people of Ukraine. 

If you have a question about trading with Ukraine or Russia use the dedicated online service or call 0300 303 8955. Read the latest information about sanctions on trading with Russia. 

For further information on sanctions contact the FCDO at sanctions@fcdo.gov.uk 

A useful webinar was held in March 2022. Representatives including from the UK Foreign, Commonwealth and Development Office (FCDO), HM Treasury (HMT), Department for International Trade (DIT), Department for Transport (DfT), Business Enterprise Industry and Skills (BEIS) and other UK government departments spoke on 17 March 2022 at a webinar entitled : UK Sanctions relating to Russia: Briefing by UK Government. The webinar was held to help attendees understand recent changes to UK sanctions relating to Russia and for their organisations to be updated and understand how to comply with recent changes. The webinar covered the following topics: sanctions legislation overview, new sanctions measures: financial, trade and transport, individual and entity designations and humanitarian issues. A recording of the webinar can be accessed here.

Financial regulatory authorities

UK financial regulatory authorities issued a joint statement on sanctions and the cryptoasset sector on 11 March 2022 reiterating that all UK financial services firms, including the cryptoasset sector, are expected to play their part in ensuring that sanctions are complied with. You can read details of the joint statement on the Financial Conduct Authority (FCA) website.

In February 2022 the UK Financial Conduct Authority (FCA)  issued guidance, available on its webpages ,on challenges in terms of disposing of Russian assets. See also the FCA sanctions page here.

In Sept 2023 the FCA issued a publication on firms’ response to increased sanctions due to Russia’s invasion of Ukraine. In the publication the FCA set out key findings from its assessments of sanctions systems and controls and includes examples of good practice and areas for improvement. While the publication is in respect of financial services firms, the findings in relation to good practices and areas that need improvement may be of interest in any efforts to making improvements to the approach to identifying and assessing the sanctions risks that firms are exposed to.

Tax

The UK exchanges tax information with Russia under the Convention on Mutual Administrative Assistance in Tax Matters and Russia and Belarus under bilateral Double Tax Agreements. This tax information is exchanged as part of global collaboration to address tax compliance risks. As of March 17 the UK has suspended all exchange of tax information with Russia and Belarus under the UK’s exchange of information agreements. You will find the link to the announcement here https://www.gov.uk/government/news/uk-suspends-tax-co-operation-with-russia

The UK Government has recently provided some useful information on Ukraine tax relief and guidance including;

a number of updates received from HMRC relevant to the Ukraine crisis which you can read about at this link.

No tax to pay on £350 ‘thank you’ payments

Legislation will be introduced to exempt the £350 ‘thank you’ payments made by Local Authorities to sponsors under the ‘Homes for Ukraine’ scheme from income tax and corporation tax. In the meantime the government has confirmed that it will not collect any tax on these payments. Recipients should also disregard such payments when calculating income for the purposes of tax credits.

Tax relief for companies making properties available

The government has confirmed that companies making dwellings available to support the ‘Homes for Ukraine’ scheme will be relieved from the Annual Tax on Enveloped Dwellings (ATED) and the 15% rate of Stamp Duty Land Tax (SDLT).

Charities and other

Other useful information relevant to the UK includes:

The Statement on Ukraine crisis and its implications for charities - GOV.UK (www.gov.uk) provides a timely reminder to charities on knowing their donors and key questions that they need to ask before accepting donations.

Likewise, the Charity Commission for Northern Ireland has also issued advice for people to give safely and for charities wishing to help in the crisis.

Following a short consultation, the designation of the Moscow Exchange (“MOEX”) as a recognised stock exchange was revoked from 5 May 2022 via a revocation order. Click here for a short news item from the Institute's news pages.

Insolvency Practitioners: please click here to read a publication from the Insolvency Service in the UK  on what Insolvency Practitioners need to consider in order to ensure that requirements are not breached in the cases they administer. It also deals with payment of dividends to sanctioned parties.

These pages are provided as resources and information only and nothing in these pages purports to provide professional advice or definitive legal interpretation(s) or opinion(s) on the applicable legislation or legal or other matters referred to in the pages. If the reader is in doubt on any matter in this complex area further legal or other advice must be obtained. While every reasonable care has been taken by the Institute in the preparation of these pages, we do not guarantee the accuracy or veracity of any resource, guidance, information or opinion, or the appropriateness, suitability or applicability of any practice or procedure contained therein. The Institute is not responsible for any errors or omissions or for the results obtained from the use of the resources or information contained in these pages.

Chartered Accountants Ireland can accept no responsibility for the content on any site that is linked to/from the Institute website. Links are provided in good faith for the potential support of members and students.