Over the past months, the implications of Brexit have been a contentious topic among accountants. With the release of the Government’s Brexit Whitepaper on July 12, we now have a better picture of the possible effects of Brexit on accounting and finance.
Brexit and Accounting in the UK
David Wood, Senior Policy Director at ICAS, a UK-based professional body of chartered accountants (CAs), identified key accounting-related issues that will be affected by Brexit.
Here are a few pointers on how Brexit will impact UK accounting standards, cross-border provision of professional services, and other related issues:
UK’s Services-Based Economy
At present, the UK recognises more than 142,000 EU qualifications for various disciplines, including social workers, engineers, and lawyers.
Moving forward, the UK wants to have similar provisions post-Brexit on the Mutual Recognition of Professional Qualifications Directive, covering professions in the same industry, such as healthcare, education, and agricultural sectors.
A study from PwC and TheCityUK in 2017 found that as much as 23.3% of all legal and accounting professionals in the EU are from the UK. Given these sectors’ heavy dependence on financial services, there is a great risk that these will be disrupted once the UK leaves the EU.
Currently, free movement in the EU allows UK and EU citizens to travel freely not only for tourism but also for short-term or temporary business matters. Likewise, they can provide professional services and specialised talent to businesses in EU member countries.
After Britain leaves the EU, it is crucial that a new mobility framework is implemented that will accord UK and EU citizens the rights that are comparable to what they enjoy now.
Audit and Accounting
The White Paper specifically mentions audit and accounting in Section 1.7.9, which states that:
- Having a set of shared accounting standards and regulatory frameworks is advantageous for EU and UK companies alike, as it facilitates access to capital markets, cross-border provision of audit and accounting services, and promotes investor confidence
- By the implementation period, the UK will seek a new relationship with the EU based on equivalence under the EU’s third-country regimes.
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