Government amends accounting rules in Companies Act for post-Brexit
The government has issued draft legislation to amend the filing exemptions for companies and limited liability partnerships (LLPs) ahead of the UK leaving the EU, but refers to 'exit day'
8 Nov 2018
The government has released the draft statutory instrument Accounts and Reports (Amendment)(EU Exit) Regulations 2018, which when passed into legislation, will effectively remove reference to European Economic Area (EEA) regulation, and replace this with references to UK markets, throughout the Companies Act 2006 and other supporting regulations.
These Regulations will take effect irrespective of the results of the Brexit negotiations. However, the Regulations are careful to use the term ‘exit day’ to allow for any extension, if required.
Under the proposed changes, an entity may now only qualify as a small-entity if they are not admitted to trading on a UK regulated market.
This would permit entities who are admitted to trade on EEA regulated markets (France or Germany, for instance), but otherwise meet the small company size criteria, to prepare and file their accounts under the small-entities regime.
For intermediate parent companies, the current exemption from preparing consolidated accounts in section 400 of the Companies Act 2006 will only be available where a UK parent further up the group prepares consolidated accounts.
However, the similar exemption in section 401, which is currently available where there is a non-EEA parent preparing consolidated accounts, will be expanded to include groups with an EEA parent.
Similarly, a dormant company will now only be exempt from preparing and filing accounts if they have a guarantee from a UK parent. Previously, this exemption was widened to include EEA parents.
The majority of this legislation is effective for periods commencing on or after exit day.
It should be noted that this legislation only applies to section 15 of the Companies Act 2006, which relates to accounting regulations for companies and LLPs.
Further draft legislation has also been published which will amend Part 16 of the Companies Act 2006, relating to audit.
As with the removal of the dormant subsidiary exemption described above, this draft legislation will amend the current audit exemption for subsidiaries of EEA parents (where the parent company agrees to guarantee the liabilities of the subsidiary) so that it is only available to subsidiaries of UK parent companies.
Report by James Waller, Anne Cowley