Out-Law News | 26 Feb 2019 | 9:29 am | 3 min. read
The government has also published guidance for firms on how to comply with UK and EU accounting rules (6 page / 209KB PDF) if the UK leaves the EU without a withdrawal agreement.
The guidance for auditors (11 page / 214KB PDF) says those who are approved to conduct audit work in the European Economic Area (EEA) based on a UK audit qualification should “urgently” contact regulators in each of the EEA countries where they work to find out if UK qualifications will continue to be recognised after 30 March.
The letter to auditors from the Financial Reporting Council (FRC) and the Department for Business, Energy and Industrial Strategy warns that if the EEA authority has decided it will no longer recognise UK audit qualifications, auditors will need to re-establish their eligibility to carry out statutory audit work in that country.
Ongoing audits in EEA countries will also be affected, if the audit report is to be signed after exit day, and auditors may need to resign so that clients can appoint auditors registered within their country.
Audit firms which carry out audits of non-EEA companies, including after exit day UK companies which are listed on an EEA market, will have to register as third-country auditors with the competent authority for that particular state. Once again, firms are advised to contact the authorities “urgently” for further information.
The government said the EU Audit Regulation would continue to apply in the UK after Brexit, subject to certain amendments.
In its guidance to lawyers, the government said it expected that UK lawyers working in the EU and in Iceland, Liechtenstein or Norway under UK qualifications and professional titles will become subject to the same rules as other non-EU lawyers in the state where they are working.
UK lawyers who practise under EU qualifications will be able to continue to practise if the UK leaves the EU without a deal, although the government recommended contacting the local regulator for advice.
The guidance also covers EU nationals working in the UK. Lawyers from the EU, Norway, Iceland, Liechtenstein and Switzerland who have joined the English and Welsh or Northern Irish profession, or who have applied to join by exit day, will be able to retain their qualification and related practice rights. This includes those lawyers who have been admitted through a transfer test, or through EU rules which allow admission after three years of experience in the UK.
The government said there would be no system of reciprocal arrangements under which EU lawyers and those from Iceland, Liechtenstein and Norway can provide regulated legal services in the UK under their home state qualification and title.
A transition period will allow Registered European Lawyers (RELs), who are registered with the relevant regulator or who have applied to register, by exit day, to retain their pre-exit practice and qualification rights until the end of December 2020.
RELs fulfilling this requirement will be able to requalify as a UK lawyer under existing routes until the end of the proposed two-year transition period, or under routes for third country lawyers after this. They would alternatively be able to undertake unreserved activities or own unregulated legal businesses, or work under a UK lawyer’s supervision.
An agreement reached with Switzerland means that UK lawyers registered and working in Switzerland on a permanent basis under their home professional title before exit day will continue to be able to practise as they do now, provided they remain registered in Switzerland.
UK lawyers who have transferred to the Swiss professional title before exit day will continue to be recognised and will continue to be able to practise as they do now, provided they remain registered in Switzerland.
UK lawyers will have four years from exit day to register to work in Switzerland under their UK professional title on a permanent basis, or to transfer to a Swiss professional title.
Similarly, Swiss lawyers registered and working in the UK, or who have transferred to a UK professional title, before exit day, will be able to continue to practise as they do now if they remain registered in the UK. Swiss lawyers also have a four-year period from exit day to register or transfer their title in the UK.
EEA auditors who are already registered with the UK professional bodies will have their registration continued. EEA auditors working in the UK who are not registered have until 31 December 2020 to begin the process of obtaining eligibility to practise by passing an aptitude test. Auditors from the Republic of Ireland will not be affected.
UK companies with subsidiaries in the EEA are reminded to check reporting requirements in the relevant state, as the corporate reporting requirements of the UK’s Companies Act will not be deemed automatically equivalent to the EU’s Accounting Directive.
UK companies with an EEA listing will need to comply with local regulations in the event of a no-deal scenario, and may need to publish accounts using EU-adopted International Accounting Standards (IAS) for the subsidiary, the parent company or the whole group.
EEA companies with UK subsidiaries will no longer be eligible for certain exemptions from preparing and filing of accounts. The government said if there was a no-deal Brexit it would issue an equivalence decision by exit day confirming that EEA companies listed in the UK will be able to use EU-adopted IAS to meet UK requirements.