Audit qualification – will you be recognised?

The UK have released a technical note entitled “Accounting and Audit if there’s a no Brexit deal” which sets out the implications for accounting, corporate reporting and audit in the event of a no deal Brexit.

The technical 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.” This position would need to be confirmed and clarified by Ireland and other EU Member States.

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

Major disruption if no deal

Minister for Finance Paschal Donohoe told the Oireachtas Budgetary Oversight committee last month that Ireland’s economy could face “major disruption” if the UK crashes out of the EU without a deal. To counter this, Mr Donohoe said that the Government has put together a series of measures which include setting up a rainy day fund, targeting a balanced budget, using windfall gains to reduce public debt among other measures. Minister Donohoe estimated that a hard Brexit could be the equivalent of reducing Ireland’s national income growth by between 0.75 percent and 1 percent. To help cope with a border, the Minister said that customs officers are being recruited and the cost would be funded in the upcoming Budget.

UK pledges to lower corporation tax rate even further

UK Prime Minister Theresa May has promised to reduce the UK’s rate of corporation tax after Brexit to one of the lowest of the G20 countries. Speaking at the Bloomberg Business Forum in New York recently, Ms May told investors that the post Brexit UK would be a dynamic and “pro-business” country.

“Whatever your business, investing in a post-Brexit Britain will give you the lowest rate of Corporation Tax in the G20. You will access service industries and a financial centre in London that are the envy of the world, some of the best Universities in the world, strong institutions, a sound approach to public finance and a consistent and dependable approach to high standards but intelligent regulation,” said the UK Prime Minister.

The UK’s corporation tax rate has been steadily falling in recent years; from 30 percent in 2007, 24 percent in 2012 and now stands at 19 percent.

A refusal to sign

Last month, 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 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 are rumours circulating that the EU are 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 November. Time will tell.