The Impact Of Brexit On Accounting And Finance In The Uk: Challenges And Opportunities

How does Brexit affect accounting firms?

The success or failure of any decision often depends to some extent on its economic impact. Brexit is no exception. Brexit will continue to impact all sectors due to potential monetary. And staff impacts, but some businesses will be more affected than others.

Today we look at how Brexit will affect accounting firms and accounting services. 

Impact of Brexit on accounting firms

The UK and EU agreed the terms of a free trade deal on December 31, 2020. Avoiding the consequences of no deal. While the deal has removed some uncertainty for Finance and Accounting firms, that doesn’t mean business is still going as usual.

For accounting firms, the main impact of Brexit could be felt on corporate clients. According to the Office for Budget Responsibility, the volume of goods trade between the UK and the EU has fallen sharply after the Trade Cooperation Agreement (TCA). Which came into force and has remained below pre-Brexit and pre-pandemic levels in January 2019. OBR expects total UK imports and exports to remain around 15% below previous levels if the country remains in the EU. Some accounting firm clients may consider relocating, resulting in a loss of clients and a negative impact on their revenue. Customers may also find their supply chains disrupted by customs controls.

Despite this potential, many accounting firms remain optimistic about their position in the post-Brexit world. In fact, a survey by RPC found that 45% of UK-based businesses plan to offer more consulting services to help clients navigate uncertainty, risks, and challenges. and opportunities related to Brexit.

How will Brexit affect accounting firms? 

Brexit has created new documents and procedures that will impact accounting firms. 

Here are some of the key ways accounting firms will be affected by Brexit:

Customs procedures. The Brexit Trade Agreement ensures duty-free and quota-free trade between the UK and EU member states. However, customers shipping goods to or from the UK will need an Economic Operator Registration and Identification (EORI) number. HMRC automatically registers Value Added Tax (VAT) for companies that are registered and have trade with EU countries. 

Companies below the VAT threshold must register online. Businesses without an EORI number will experience increased costs and delays. A customs declaration is required for all goods entering or leaving the UK. Customs declarations can be complicated, so you may need to hire a customs agent or freight forwarder or invest in specialized software to manage these declarations.

VAT. UK businesses and EU countries that do business with the UK must apply VAT to their transactions. These registered businesses do not need to pay LOY import tax when their goods arrive in the UK. But must charge it on their VAT return. Such businesses do not need to obtain permission from HMRC to use deferred VAT accounting. But they must include the EORI and VAT number on the customs declaration. This deferred accounting is beneficial for companies with cash flow problems, but will result in additional paperwork for tax returns.

While these issues are more likely to affect an accounting firm’s clients than the firm itself, clients will have growing planning and consulting needs as new rules add paperwork and slow down the process. 

How will Brexit affect the audit?

UK companies will need to appoint a UK registered auditing firm to sign the audit reports.

Under the Brexit deal, there is no longer automatic recognition of qualifications and qualifications for many professionals, including accountants and auditors. Some EU countries, including France, Italy and Portugal, require an auditor to be a resident of that country in order to practice. In other countries, the auditor may need to reassess. The Institute of Chartered Accountants of England and Wales (ICAEW) warned that auditors will need to consider the impact of Brexit-related risks on the companies they audit. 

Guide, Brexit and Auditing:

Risk factors provide a framework for analyzing these effects.

Meaning of financial statements

In the UK, the Brexit transition period ends on December 31, 2020, so financial statements for years beginning on or after January 1, 2021 are subject to International Accounting Standards. (IAS) adopted by the United Kingdom instead of the IAS standard adopted by the European Union. Initially, these standards will be the same, but they may differ as each standard-setting body adopts its own post-Brexit accounting standards. This will lead to additional complexity for the consolidated financial statements of international corporations. UK companies with subsidiaries in the European Union or presence in a European Economic Area (EEA) country will need to comply with that country’s reporting requirements.

The Financial Reporting Council has encouraged companies to be specific about the threats they face in leaving the EU and details of actions planned or taken in their financial statements. .

What does this mean for accountants as individuals?

Qualified UK accountants no longer hold qualifications that are automatically recognized by all EU member states. Several EU member states, including Italy, Germany, the Netherlands and Spain, recognize UK accounting qualifications without restrictions. However, other countries, including Denmark, France and Greece, require UK accountants to pass an “economic need” test to work in or in their home country.

UK-based accountants and auditors coming to the EU for professional purposes may require a visa or work permit. British citizens residing in the UK will need at least six months until their passport expires to travel to most EU countries other than the Republic of Ireland. If their passport expires earlier, they must apply for and receive a new passport before traveling.

After Brexit, what changes in British accounting standards? 

Going forward, any changes or new International Financial Reporting Standards (IFRS) must be approved by the newly established UK Endorsement Board (UKEB) before applying to UK businesses. 

Financial services, anti-bribery and anti-corruption standards can be high on regulators’ priority lists.

Time will tell whether this impact is a blessing or a curse for accountants and auditors. However, accounting is often the first call for many business owners and managers when faced with economic challenges. If your accounting firm or accounting department has not already done so, then you need to assess your workload in the post-Brexit environment and start planning. 

What will Brexit mean for financial reporting in the UK?

The economic importance of financial statements should not be overlooked when considering the political effects of Brexit. Reliability in the financial statements of listed companies increases investor confidence in capital markets, while IFRS is increasingly becoming the reporting standard for listed companies worldwide. Leaving the IFRS would therefore risk making the UK less attractive to international investors.

Should the scope of the current regulatory framework be reviewed? We asked what could be done to improve or streamline the scope of the current regulatory framework after Brexit, when the UK will no longer be subject to EU law. For example, should reporting obligations be reduced for small businesses?

How can the UK continue to be a major player in global standardization?

Importantly, we are also looking at how a post-Brexit UK can still play a leading role in the development of international reporting. We argue that if the UK is to continue to be a major player on the international stage, UK authorities will need to support UK participation in both the Organization IFRS and ‘Accounting Standards Advisory Forum’.

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