Government passes SI to ensure accounting compliance post Brexit
Legislation to protect post Brexit filing exemptions for companies and limited liability partnerships (LLPs) under accounting rules have now been passed via a statutory instrument, SI 2019 No. 145, to ensure compliance with the Companies Act 2006
15 Feb 2019
Due to company and LLP year ends it was critical that the government ensured that statutory accounting rules would bridge the Brexit transition period.
The Accounts and Reports (Amendment)(EU Exit) Regulations 2019 (SI 2019 No.145) amend the filing exemptions for companies and limited liability partnerships (LLPs) ahead of the UK leaving the EU, but refers to 'exit day', giving room for potential extension of Brexit day.
The statutory instrument, passed on 30 January, removes references to the European Economic Area (EEA) regulation, and replaces this with references to UK markets, throughout the Companies Act 2006 and other supporting regulations.
Under the new rules, an entity may now only qualify as a small-entity if they are not admitted to trading on a UK regulated market.
This regulation ‘applies in relation to financial years that begin before, but end on or after exit day’.
It also clearly allows for a delay to the Brexit date, stating that ‘under these regulations, the “financial year” is to be construed in relation to any amendment to an enactment made by these 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.
The government has not produced a full impact assessment for this instrument as’ no, or no significant, impact on the private, voluntary or public sector is foreseen’, the SI states.
Schedule 1 makes some minor and technical amendments under section 2(2) of the European Communities Act 1972 (c68), updating some cross-references to EU law before exit day.
Schedule 2 amends primary legislation, namely the Companies Act 2006, the Friendly Societies Act 1992 (c40) and the Building Societies Act 1986 (c53).
Schedule 3 amends secondary legislation, concerning the production of accounts and reports (including reports on payments to governments) for those business undertakings within scope of the Regulations.
For intermediate parent companies, the current exemption from preparing consolidated accounts in s400 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 s401, 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.
Report by Sara White
For details on compliance with the Companies Act 2006, go to Croner-i Tax & Accounting Practical Guide to the Companies Act