The Financial Reporting Council confirmed a subtle but key change to the audit exemption for subsidiaries of existing European Economic Area (EEA) groups. If your parent is based in the EEA, your UK company or LLP might need to have an audit after Brexit.
As a UK company or LLP, under the Companies Act 2006, there are currently three ways in which you can qualify to be exempt from audit:
- Dormant company
- Small company or member of a small group
- Any sized subsidiary in a UK or EEA group with a parent guarantee
As a result of Brexit, the exemption for subsidiaries changes. Since 2012, UK subsidiaries of any size could claim audit exemption if their accounts were included in their EEA parent’s consolidated accounts. There are a large number of criteria to fulfil in order to claim this exemption, including:
- The parent must guarantee all of the subsidiary’s liabilities in respect of that year
- The parent company’s consolidated audited accounts must be filed at Companies House
After Brexit, the subsidiaries audit exemption will only be available to UK companies and LLPs with a UK parent company.
If your parent company is in the EEA, you will no longer be able to apply the exemption for subsidiaries and might need to have an audit.
This change take place for accounting periods starting on or after 31 December 2020.
It’s worth noting that if you are part of a small group, you can still take advantage of the exemption for small companies and LLPs.
If you’re unsure, please contact us and we will be able to give you a definitive answer on whether or not your company or LLP needs an audit. Contact our expert Gary Wong on firstname.lastname@example.org or +44(0)330 024 3200 and he will be happy to help.
Note: The EEA includes EU countries as well as Iceland, Liechtenstein and Norway.