Audit exemption by parent guarantee s479A and Brexit
9 March 2020: as more amendments are made to law which affect its availability, we clarify how Brexit has affected audit exemption by parent guarantee.
Prior to Brexit-related amendments
Broadly, prior to any Brexit-related amendments, s479A of the Companies Act 2006 permitted a subsidiary with an EEA parent to take audit exemption if:
- All of the members of the subsidiary agreed to the exemption in respect of the financial year in question;
- The EEA parent guaranteed all outstanding liabilities of the subsidiary at the end of the financial year;
- The EEA parent prepared consolidated, audited financial statements which included the subsidiary;
- These consolidated, audited financial statements were filed at Companies House; and
- The other (mostly administrative) requirements of s479A were met.
What is the post-Brexit position?
From a practical perspective, if it is a UK parent that currently prepares the consolidated, audited accounts and provides the guarantee, the Brexit-related legislation changes will not affect the availability of the s479A audit exemption.
Despite the UK leaving the EU on 31 January 2020, the s479A audit exemption continues to be available if it is a non-UK parent which currently prepares the consolidated, audited accounts and provides the guarantee, for periods commencing before exit day (currently defined as the end of the transition period – i.e. 11pm on 31 December 2020).
Why has this kept changing?
Various sets of amendments were made with the intention of ending the exemption on Exit day unless there was a withdrawal agreement with a transition period. The withdrawal agreement came to pass in January 2020 and so the exemption will now cease (unless it is a UK parent preparing the consolidated, audited accounts and providing the guarantee) for accounting periods commencing from the end of the transition period.
The original amendments didn’t actually achieve this intention and there have, therefore, been multiple sets of amendments and changes to legislation to reach this position.
If you’re an ICAEW member, affiliate or member of staff in an eligible firm with member firm access, you may discuss your specific situation with the Technical Advisory Service on +44 (0)1908 248 250.