UK company law changes following Brexit have impacted the ability to take advantage of audit and consolidation exemptions for UK subsidiaries of parent companies registered in the European Economic Area (EEA). For periods commencing on or after 1 January 2021, these subsidiaries will no longer be able to take advantage of the following:
• Parent company guarantee to exempt the UK subsidiary from an audit.
This may mean many UK subsidiaries will require a statutory audit by law for the financial year ended 31 December 2021. Audit exemption is still available where there is a sub-group within the UK and a UK parent company guarantees liabilities for its UK subsidiaries. However, the UK parent providing the guarantee must prepare and file consolidated accounts at Companies House.
Groups that have grown through acquisition and have more than one UK subsidiary should consider if it is worth reorganising its UK entities to allow audit exemption. To do this requires UK consolidated and audited financial statements to be filed at Companies House.
• Exemption to prepare consolidated financial statements within the UK under S400 of Companies Act 2006.
Exemption is still available under S401 of Companies Act 2006 but to qualify there are more requirements. One of these is that the EEA parent group financial statements need to be filed at Companies House in English. If the EEA parent prepares group financial statements in another language, a certified translation into English is needed.
If you believe your group may be impacted or are unsure, please contact us for advice.