Further Brexit no-deal technical notes – Accounting and Business Structuring

Wed 24 Oct 2018

The Government has issued two new technical notes on what happens if there is a no-deal Brexit concerning corporate reporting and business structuring. The notes below provide a brief summary of the main points covered in these notes.

For a further discussion of the tax implications of Brexit, whatever form it takes, please get in touch with your usual Mazars tax contact

Accounting, corporate reporting and audit if there’s no Brexit deal

The corporate reporting regime will be unchanged in many respects; however, certain changes are necessary to reflect that the UK is no longer a Member State. UK incorporated subsidiaries and parents of EU businesses will continue to be subject to the UK’s corporate reporting regime.

Some the Companies Act 2006 exemptions relating to the preparation of individual accounts will no longer be extended to companies with parents or subsidiaries incorporated in the EU. For example, a UK company is currently exempted from having to prepare individual accounts if it is dormant and part of a group of companies with an EU parent company that prepares group accounts. This exemption will only continue to apply after exit if the parent company is established in the UK.

UK companies listed on an EU market may also be required to provide additional assurance to the relevant listing authority that their accounts comply with International Financial Reporting Standards as issued by the International Accounting Standard Board. This will need to be done in accordance with EU third country requirements.

UK branches of EU companies will become subject to additional requirements under the overseas companies regime, and after exit will be subject to the same accounting and reporting requirements as non-EU companies that have a branch here.

Structuring your business if there’s no Brexit deal

The UK tax regime for UK-branches of non-EU companies will remain substantially the same but the cross-border regimes for UK companies operating in the EU will change because the UK will no longer be an EU member state and so these companies will become third country businesses in relation to the EU.

There will be no change in who can be an owner, senior manager or director of a UK company, as the UK doesn’t apply any nationality restrictions to owners or managers of UK companies.

UK branches of EU companies, currently subject to the overseas companies regime, will become subject to the same information and filing requirements as any other third country’s companies’ branches but those additional requirements are minimal.

Cross-border mergers involving UK companies will no longer be able to take place under the EU Directive 2005/56/EC – cross-border mergers of limited liability companies (although they can be structured through private contractual arrangements). EU member states will no longer be required to give effect to cross-border mergers that do not complete prior to the UK exiting the EU.

Before exit, European Economic Interest Groupings registered in the UK may want to consider transferring their official address to another EU member state and should make themselves aware of the timeframes for so doing. European Economic Interest Groupings with their official address in other EU member states can have an establishment in the UK; they will need to ensure that they comply with the registration requirements.

Societas Europaea have the option of converting to a UK public limited company (plc) provided they have been registered as a Societas Europaea for at least 2 years or have had 2 sets of annual accounts approved. They may also want to consider whether they wish to move their seat of incorporation to another EU member state. They will need to consider the relevant timeframes for either course of action.

Owners of Societas Europaea and European Economic Interest Groupings may wish to maintain awareness of the further information that will be published on the automatic conversion of their entities to a new UK structure by ensuring that the contact details held by Companies House are up to date.