Regulation 54C of the Russia (Sanctions) (EU Exit) (Amendment) (No.14) Regulations 2022 prohibit the direct or indirect provision of certain defined services (including “accountancy services”) to “persons connected with Russia”.
Concerns have been raised about the definition of some of the services used in the The Russia (Sanctions) (EU Exit) (Amendment) (No. 14) Regulations 2022 around the meaning (and practical effect) of the term “indirect”.
The UK Government has issued Statutory Guidance on the regulations (last updated on 21 July 2022). The guidance states that: “The definition of accounting services is based on the Provisional Central Product Classification (CPC) Codes 1991 and includes CPC 86212 Accounting Review Services, CPC 86213 Compilation of Financial Statements services, CPC 86219 Other Accounting Services and CPC 86220 Bookkeeping Services, except tax returns.
“The definitions of business and management consulting and public relations services are based on Extended Balance of Payments Services classification (EBOPS) 2010 and includes EBOPS 10.2.1.3 – Business and management consulting and public relations services includes advisory, guidance and operational assistance services provided to businesses for business policy and strategy, and the overall planning, structuring and control of an organisation.”
The guidance states that the definitions used in the legislation are “based on” the classifications used in the CPC Codes 1991 and EBOPS 2010. The accounting classifications referred to in the guidance do not cover tax (which are dealt with in separate classifications).
While it might be possible to mount an argument that services which are not explicitly referred to in the statutory guidance should be excluded from the prohibition by implication, it is important to note that the legislation does not itself refer to (or explicitly incorporate) these classifications.
Regulation 54D defines the services that are prohibited, and it is this definition that must be complied with.
As such, it is possible that the definition of services in regulation 54D might be potentially wider than the matters listed in these classifications.
It is therefore important that anyone who might be providing services to “persons connected with Russia”:
- should break down the actual services being provided into constituent parts and analyse them carefully; and
- should obtain legal advice, tailored to their explicit circumstances, to ensure that they do not inadvertently fall foul of the prohibition on providing the defined services, with the potential criminal and reputational consequences that might follow.
If in doubt, or if the legal advice is that the service would fall under the prohibition, then consideration may be given to applying for a licence to provide the service. However, the very limited circumstances in which a licence may be granted and the short time frames applicable should be noted.
Firms that do not have previous (or extensive) experience of providing services to “persons connected to Russia” should exercise particular caution if they are approached to do so by new clients.
Recent guidance issued by OFSI and US authorities in relation to red flags for potential sanctions evasion, can be found at the following links:
- The Growth Plan 2022: Income tax rate cuts to boost growth
- The Growth Plan 2022: Off-payroll working rules reversed from April 2023
- The Growth Plan 2022: Au revoir OTS
- The Growth Plan 2022: Chancellor extends reliefs and incentives for business investment
- The Growth Plan 2022: SDLT changes in England and Northern Ireland
Hear a panel of guests dissect the latest headlines and provide expert analysis on the top stories from across the world of business, finance and accountancy.Find out more
Stay up to date
You can receive email update from ICAEW insights either daily, weekly or monthly, subscribe to whichever works for you.Sign up
News in brief
Read ICAEW's daily summary of accountancy news from across the mainstream media and broader financing sector.See more