Brexit Changes on Financial Reporting

As we all know, the Brexit transition period ended on 31 December 2020, but what impact does that have on our financial reporting?

There have been some very subtle but key changes to pieces of UK company law – make sure that your group structures are aware of these changes and do not get caught out.

The below relates to any accounting periods beginning on or after 1 January 2021.

Exemption from preparing group accounts

Previously there were two Companies Act exemptions relating to an intermediate parent who is consolidated at a higher level; EEA parents (s400) and non-EEA parents (s401). This has effectively now changed to UK parents (s400) and non-UK parents (s401). This aspect should simply be a disclosure change however if an EU subsidiary previously took a consolidation exemption due to having a UK parent consolidation, then they will no longer be able to use that exemption going forwards. This may mean that EU intermediate parents may now require consolidating at local level.

Exemption from audit via parent company guarantee

Previously, an EEA established parent company could provide a guarantee over a subsidiary in order to avoid a subsidiary audit. Note that this has now changed and the parent company must be established in the UK. Therefore, if a non-UK parent has previously guaranteed the liabilities of a subsidiary, this may result in a full audit now being required alongside the group.

Dormant companies exemption from preparing accounts

Similarly to above, a dormant company was exempt from preparing and filing accounts if the parent company (whom guaranteed the liabilities) was registered in the EEA – note that this has now changed to the UK, again potentially affecting eligibility.

If you require assistance regarding any of the above changes or how they may impact your group, please do get in touch with us by emailing support@garbutt-elliott.co.uk or call  01904 464100.