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What Does Brexit Mean for Accountants?

What Does Brexit Mean for Accountants?

Accounting

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Following the Brexit deal, the credentials of accountants qualified in Britain are no longer automatically recognised by all member states of the EU. Some countries, such as Denmark, France and Greece, now demand that UK accountants undergo an ‘economic needs’ test to work with, or in, their countries.  

 

On the other hand, EU states such as Italy, Germany and Spain continue to recognise UK professional accountancy qualifications and have not imposed any restrictions. The bottom line is always to check the individual stance of each EU country ahead of carrying out business with a company based in each one. 

 

The impact of Brexit will mostly be felt by accountants via their clients. Brexit means that some businesses are relocating. That’s because their supply chains have been hit hard by the new customs checks due to the end of the free flow of goods and services that is at the heart of the EU. And, on the human front, the changes to free movement of people could also lead to skill shortages.  

 

Accountants can also be expected to carry on receiving a large and varied range of inquiries. Clients will want to know the answers and seek advice regarding changes which are still relatively new. That means clients will be searching for guidance and assistance with forecasts, planning and managing their working capital. 

 

Here is a list of the issues and changes that Brexit means for most accountants who have clients that have been impacted... 

 

Financial reporting 

Firms must use UK-adopted International Accounting Standards (IAS) rather than EU-adopted IAS when drawing up annual accounts for financial years beginning on or after January 1, 2021. A UK-registered audit firm will also be required for UK companies for signing their audit reports. 

 

Companies incorporated in the UK which have a subsidiary or other type of presence in a European Economic Area (EEA) state must be in compliance with the reporting requirements of the member state in question.  

 

Furthermore, financial bodies, such as banks and insurance companies, must follow the disclosure and transparency rules of the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA). 

 

Customs processing and increased bureaucracy 

Although one of the main issues in the Brexit agreement was enabling efficient documentary clearance in cross-border trade between Britain and the EU, companies can still expect considerable bureaucracy. This relates to customs declarations necessary for goods entering or exiting the UK, and also includes goods being moved between the British mainland and Northern Ireland. 

 

EORI number  

The Brexit deal sought to provide for tariff and quota-free access to the EU, so that both sides could continue trading similarly to the way they did previously. Businesses are now required to provide a UK EORI number (Economic Operator Registration and Identification) in order bring goods into the UK as well as taking them out. 

 

VAT after Brexit 

Following Brexit, UK businesses must apply VAT in trading with companies in EU member countries in the same way as they do with firms in non-EU member states. The same applies to companies in EU countries trading with the UK. Additionally, UK firms must also register for VAT in the EU state in which they are doing business.  

 

HMRC automatically has records of VAT-registered firms that have already traded with counterparts in the EU. Meanwhile, companies below the VAT threshold must make an online application.  

 

Since the UK has removed its VAT Mini One Stop Shop (VAT MOSS) scheme, UK digital companies must now declare sales and pay VAT to the authorities in the EU member state with which they are trading. Firms supplying digital services to clients in EU states can still use VAT MOSS, but are required to register for it in each EU state where they sell services.  

 

Firms which are VAT registered in the UK can take advantage of postponed accounting for imports from EU and non-EU states alike. There is no need to pay import VAT when their goods arrive at British ports or airports, but must note and account for it on their VAT returns. 

 

VAT for Northern Ireland 

Since Northern Ireland’s border with the EU remains open, companies must pay UK import VAT on any goods imported into Britain. Firms importing goods to Northern Ireland from Britain will have to pay EU import VAT (which can be put off via postponed accounting). As for imports and exports between the EU and Northern Ireland, they simply continue according to current EU practices. 


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