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ICAEW recommendations

A full list of ICAEW recommendations as the UK exits the European Union.

These business areas have been identified as priority areas for government attention.


EU legislation: The Accounting Directive 2013/34/EU

What it does: Governs the preparation of annual financial statements by companies.

UK implementation: Statutory Instruments 2015 No. 980  The Companies, Partnerships and Groups (Accounts and Reports)

Impact of a change to the status quo: Many EU requirements were already part of the UK reporting structure long before we joined the EU so there is unlikely to be much appetite for making major changes to company law. There is also likely to be little appetite for changing UK accounting standards at this stage, especially as the UK's new financial reporting regime is still bedding down. It may be worth revisiting the small companies regime at some stage but this is unlikely to be seen as an immediate priority.

In the longer-term, there is certainly scope for simplification and deregulation eg, some legislation could ultimately be withdrawn with the power to set detailed requirements devolved to the FRC.

Impact ratio: Medium

Anti-money laundering

EU legislation: The 4th Anti-Money Laundering Directive (EU) 2015/849 and the Fund Transfer Regulation

What it does: Gives effect to the latest FATF international standards. Aims to enhance the anti-money laundering regime to ensure its effectiveness.

UK implementation: Currently being transposed into UK law.

Impact of a change to the status quo: The UK’s role as a leading proponent for proportionate rules that tackle money laundering means that it is important we remain aligned with international standards. Nevertheless, after the new AML rules have had an opportunity to bed down the government should review the regime to ensure it is operating effectively and meeting the objectives for it.

Impact ratio: Medium


EU legislation: Directive 2014/56/EU on Statutory Audits of Annual Accounts and Consolidated Accounts and Regulation 537/2014/EC on Specific Requirement Regarding Statutory Audit of PIEs

What it does: Strengthens the coordination of audit supervision throughout the EU and facilitates auditors operating across EU. Affects all areas of audit regulation, including professional mobility, market competition, auditor oversight, audit quality and standards application, audit reporting, corporate governance related to auditors, auditor selection and auditor independence.

UK implementation: Statutory Instruments 2016 No. 6049 Companies Auditors

Impact of a change to the status quo: Withdrawal could impact the ability of UK auditors to move and work across the EU and of EU auditors to move to UK offices. Ultimately this could threaten the UK’s pre-eminent role in accounting and audit. Furthermore, the loss of recognition for the UK’s competent authority, the Financial Reporting Council, would negatively impact ICAEW’s ability to operate as a qualifications provider across the EU.

We would encourage Government to continue to explore ‘passporting’ of professional audit qualifications. ICAEW has also been working on the ‘Common Content’ project with other leading European institutes to harmonise the learning outcomes of qualifications and work towards a common training framework.

Impact ratio: High

Capital markets

EU legislation: Prospectus Directive/2003/71/EC

What it does: Prospectus Directive was introduced in 2003 aimed at providing a ‘single passport’ for issuers of debt and equity so that they can be sold across the EU once they have met the requirements in a single state.

UK implementation: Statutory Instruments 2005 No. 1433 Prospectus Regulations 2005

Impact of a change to the status quo: It is possible that UK incorporated issuers will effectively be treated as third-country issuers for Prospectus Directive purposes. A UK incorporated issuer wanting to offer shares to the public or admit shares to a regulated market in another member state would need to determine its new competent authority and arrange for that authority to approve the prospectus. There is a possibility that the exemptions could diverge over time, or that the UK could introduce additional exemptions in order to attract investment into the UK or to reduce barriers to investment.

Impact ratio: High

Data flows – cross business

EU legislation: Digital Single Market/Free flow of data initiative

What it does: DSM calls for the ‘rapid removal of key differences between the online and offline worlds to break down barriers to cross-border online activity’.

Impact of a change to the status quo: If the UK finds itself excluded from the FFDI it will have to compete on the basis of the 27 sets of national rules.

Impact ratio: Medium

Data protection

EU legislation: General Data Protection Regulations

What it does: Introduces various amendments to existing data protection law including ‘right to be forgotten’ new consent rules, definitions, data protection officer, increased fines for breaches.

UK implementation: Must come into effect by end of May 2018.

Impact of a change to the status quo: If UK fails to implement it then it will not be considered an ‘adequate’ jurisdiction for data protection to ensure trade with EU as a whole so will have to negotiate with each individual Data Protection Authority (DPA) in member states to ensure ‘equivalence’.

Impact ratio: Medium

EU legislation: EU-US Privacy Shield

What it does: Replaces ‘Safe Harbor’ for data transfers between US and EU member states/DPAs.

UK implementation: Still being finalised.

Impact of a change to the status quo: The UK will need to negotiate with the US to replace or retain ‘safe harbor’ and also with EU DPAs to ensure ‘equivalence’ with the Privacy Shield.

Financial Services Regulatory Coherence

EU legislation: CRD IV, Solvency II, MiFID II, AIFMD etc.

What it does: A consistent regulatory framework was established for a single market in financial services under the Financial Services Action Plan and subsequent initiatives.

UK implementation: Various enabling legislation. PRA and FCA rulebooks.

Impact of a change to the status quo: A consistent regulatory and capital framework facilitates effective competition in financial services. Increasingly financial market infrastructure and prudential capital regulations are agreed at an international level, with global banking rules agreed through the Basel Committee and others being developed by the EU in conjunction with other global rule-makers.

The UK benefits from consistent international rules since it facilitates global financial markets. Withdrawing from EU and, by extension international, rules may be expensive to implement and may make the UK less attractive as a global financial centre. It is equally important, however, to maintain the UK’s influence over the development of international regulations post-Brexit.

Impact ratio: High


EU legislation: Regulation 1346/2000/EC on Insolvency Proceeding

What it does: Creates a framework for the commencement of proceedings and for the automatic recognition and co-operation between the different member states.

UK implementation: Statutory Instruments 2002 No. 1037 Insolvency

Impact of a change to the status quo: Most sizeable insolvencies involve other EU countries and the Regulation is a very important tool to enable creditors to prove their debts and enforce security. Also London is a hub for complex, cross-border restructurings and related insolvency proceedings. At present groups will often shift their ‘Centre of Main Interest’ to the UK to facilitate restructuring. The UK offers efficient, predictable court outcomes and good effective restructuring tools. Loss of recognition could lead to the UK becoming a less attractive place to undertake this activity.

Impact ratio: High

Listed companies financial reporting (International Financial Reporting Standards)

EU legislation: Regulation 1606/2002/EC on the Application of International Accounting Standards

What it does: Requires companies with securities admitted to trading on a regulated market of any EU member state to use International Financial Reporting Standards (IFRS) in preparing their consolidated financial statements.

UK implementation: Statutory Instruments 2004 No. 2947 International Accounting Standards and Other Accounting Amendments

Impact of a change to the status quo: Attracting global capital flows to UK markets relies upon investor familiarity with UK listed company reporting and their ability to compare UK companies with their international peers. Given the continued spread of IFRS – which is adopted in 120+ countries – we strongly believe that the UK should remain aligned with IFRS. To do otherwise so would risk undermining investor confidence.

The IAS Regulation requires formal legal endorsement of each standard before adoption. The government need to give urgent consideration to how this will be achieved. A crucial new IFRS for insurance contracts is expected to come into effect in 2020. Without early government action there is a risk that UK insurers will not be able to apply the standard.

While the UK’s place in the world means that we will always have some influence on the international standard-setting process, the UK will nonetheless need to redouble efforts at every stage if it wishes to continue to have a significant impact on the international standard-setting process once it is no longer part of the EU. UK companies listing into an EU member state will need to report under IFRS or a recognised equivalent.  Moving away from IFRS as adopted by the EU and/or as issued by the IASB would create problems for UK companies whose securities are traded on the US and/or EU markets.

Impact ratio: High


EU legislation: Cross-border Merger Directive 2005/56/EC

What it does: Provides a simplified process for the combination of businesses or group reorganisation within the EEA.

UK implementation: 2007 No. 2974, The Companies (Cross-Border Mergers) Regulations 2007

Impact of a change to the status quo: Cross border combinations of UK companies and those incorporated in the EEA could prove more problematic. At present the simplified regime allows the assets of one company to be ‘collapsed’ into another or for both to be collapsed into a new entity. This simplifies the process and is particularly useful for group reconstruction. It is also typically tax neutral. Post Brexit our continued access to this regime depends on reciprocation by other states.

Impact ratio: High

Passporting for Financial Services

Passporting is a major issue for many institutions, particularly investment banks and Lloyd’s and London Market insurers.

What it does: Enables financial services businesses authorised in the UK to carry on permitted activities in any other EEA state by either exercising their right to establish a branch or agent, or by directly providing cross-border services.

UK implementation: PRA and FCA rulebooks. Financial Services and Markets Act 2000 (EEA Passport Rights) Regulations 2001 (SI 2001/2511).

Impact of a change to the status quo: The ability of UK firms to carry out business in the EU without seeking incremental authorisation is a major issue for many institutions, particularly investment banks and Lloyd’s and London Market insurers. Passporting enhances outward market access and inward investment attractiveness. Without it institutions may need to set-up new EU subsidiaries, which could involve significant costs and disruption and divert activity away from the UK. The equivalence regime may provide an alternative means of retaining market access but equivalence negotiations have been very long and it can be withdrawn at very short notice.

Impact ratio: High

Recognition of professional qualifications

EU legislation: Directive 2005/36/EC on the Recognition of Professional Qualifications

What it does: Swift recognition of UK chartered accountants in EU member states and vice versa giving the ability to join the local institutes, register in a new country and work in a like manner to home.

UK implementation: Statutory Instruments 2015 No. 2059 Professional Qualifications

Impact of a change to the status quo: Losing this framework would limit the ability to move UK staff to EU offices or for individuals to move independently and work in a like manner to home. It would also impact ICAEW (and many other UK professional institutes) as a qualifications provider across the EU. Government should retain or, ideally, enhance mutual recognition of professional qualifications as part of the negotiation process.

Impact ratio: High


EU legislation: EU VAT Regulations

What it does: UK exports of goods and services between the UK and the other 27 EU countries may be subject to VAT. Sales to VAT registered customers in the EU are zero-rated.

UK implementation: Value Added Tax Act 1994

Impact of a change to the status quo: Inability of HMRC to continue to operate the Mini One Stop Shop (MOSS) for UK businesses could mean that UK businesses will either have to register for VAT in all EU countries where they have customers, or register for MOSS in another EU country (Ireland for example). Similarly EU suppliers might have to register for UK VAT with HMRC.

Customs procedures could also become more complex. Intra-EU movement of goods may be deemed ‘imports and exports’, as opposed to ‘acquisitions and despatches’. This could have implications on clearance of goods at ports, deferred duty costs, including guarantees, and related cash flow costs.

Impact ratio: High