U.K. accounting faces chaos in no-deal Brexit 

Accounting in the U.K. would be thrown into chaos if the country fails to strike a deal on how to leave the European Union, which looks increasingly likely.

“Things could simply stop,” Anthony Walters, Head of Public Affairs at the Association of Chartered Certified Accountants (ACCA),told Bloomberg Tax by phone.

Chances of the U.K. leaving the EU without a deal in place are rising, with no agreement reached on basic matters such as trade terms or visa requirements after Brexit.

Splendid Isolation

“First, accountants would face the same problems as all professional services firms if we left without a deal in place,such as the ability to recruit overseas and fly in and out of Europe,” Walters said. “Without these, accountancy firms won’t be able to use their expertise internationally, and existing skills shortages will become worse—there are already shortages of risk managers, for example, which will be hard to plug without EU staff.”

The impact would fall on accounting firms rather than on accountants working in industry. “Accountancy is not a regulated profession like law,” Walters said, “and so there is no requirement for people to be qualified if they work as an accountant in industry.”

However, Britons working for accounting firms abroad would find that their qualifications are no longer recognized.

Firms Forced to Restructure

Auditing international companies would also become very difficult if countries no longer recognized each other’s qualifications or allowed data transfers, and there are also requirements for auditing firms to have a minimum level of local ownership. “The big firms’ international arms are often based in London and rely heavily on U.K. staff,” Walters said. “This would force the large firms into restructuring.”

There could be problems with regulation, too, if the U.K.’s regulator finds it can no longer co-operate or share information with its counterparts in countries such as France and Germany. “GDPR would make it illegal to share information between countries if there is no deal to ensure mutual recognition of regulations,” Walters said.

KPMG LLP published the results of a survey Aug. 22 showing that 54 percent of respondents now expected a no-deal Brexit.

The government on Aug. 23 issued guidance on how to cope without a deal.

“There needs to be something in place,” Susanna Di Feliciantonio, the Institute of Chartered Accountants in England and Wales’s head of European affairs, told Bloomberg Tax by phone. She agreed with Walters that a no-deal Brexit would cause huge problems for accounting firms. “Otherwise there will be broader consequences for the business and finance community,” she said.

She pointed out that in a February letter, the European Commission “spelt out in no uncertain terms that, in the event of a no deal, U.K. firms would no longer be recognized as auditors in the E.U.”

A preliminary Brexit agreement is supposed to be announced in October, before the U.K. formally leaves the EU at the end of March 2019.

Source: BNA – U.K. Accounting Faces Chaos in No-Deal Brexit

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