When the formal announcement came that the United Kingdom had voted its departure from the European Union (EU), there have been several components of the UK business scope that were shocked, and not the least of them was the accountancy firms. The Brexit decision carries a straightforward link to the accounting industry and the various dimensions in which UK accounting businesses can function in the long run. This is not really a case where we can say that everything about it is unacceptable.
One particular aspect that will manifest itself as the companies formally disjoint from the EU is that businesses will start reviewing their choices to decide on the suppliers and could even move forward in forging better deals than what they had in place before. Moreover, they may push towards expanding their own lines to fulfill the prospects of the new demand for goods and products made in UK.
According to a study commissioned by the AAT and ACCA, almost as half of the MPs voiced their affirmation on the imminent positive impact of Brexit on accounting firms. 47% of the MPs asserted that Brexit would be favourable and gain an approving headway as accountants would be in a position to advise their clients on the ramifications involved in getting out of the EU. Only 23% were of the opinion that Brexit does not really put forward an encouraging opportunity for accountancy while the rest 25% remained inconclusive.
The survey also revealed that 55% of the MPs were convinced that the EU tax legislation needed to be reviewed right away, instead of waiting for Brexit to materialize. Only 18% of the MPs contradicted.
The study reflected the confidence among the MPs about the possibilities of the accountants rising to the challenges brought forth to business by the unpredictability that ensued because of Brexit. But it is further vital to understand that politicians acknowledge the merits which the accountancy profession can bring about to the UK economy as it sets foot in one of its most significant periods of economic transformation.
The impact of Brexit on accounting IFRS appears to be limited. This is a good point to know. Listed companies which are reporting under the IFRS standards must continue doing so by the EU regulation. But this is surmised to be included into UK law through the EU repeal bill. The requirements of EU for financial and non-financial reporting by different entities are present in the Accounting Directive and are covered already under the UK law.
The study also looked into the matter of passport rights, which permits UK companies to render financial services within the scope of EEA. 40% of the MPs expressed their agreement over the necessity of securing auxiliary contracts for companies which are holding passport rights. 29% of the MPs were not convinced and 25% showed no inclination about this issue.
The UK audit profession has undoubtedly benefitted from the use of globally acclaimed high-quality audit standards. It provides a good measure of international coordination across the audit business which is believed to be relevant to the market environment. The potential impact of Brexit on audit seems low, at least in the short-term. However, Brexit may grant an opportunity in revisiting a few of the amendments set forth by the EU audit reform. Although the probabilities for changes exist following Brexit, UK has been supportive in promoting recurrent retendering of audits of specifically listed systems.
These changes have now been appended and agreed as part of a good practice. The likelihood and need for more changes, therefore, would appear to be narrow. However, it is conjectured that UK could reconsider the purview of typical facets of the EU audit legislation if these practices turn out to be unnecessarily burdensome.
A good majority of the accounting laws that have so far been followed in the UK were primarily ordained by several directives that were also executed and administered by the EU. These ordinances comprised of the provisions defining the process of creation of accounting reports, the exact stage of their creation and various other features. The UK government will undeniably offer new directives which are akin to the ones held by the EU, but to what extent the similarities remain needs to be examined.
It is familiar that opportunities go side-by-side with threats. For accountants, a dearth of relevant skills, post-recession in 2008 was already a big worry. With Brexit, the situation is probably going to be aggravated. Until now, British accountancy businesses employed accountants only from inside the EU without asking for an immigration authorization. But, in the wake of Brexit, employment assents may require an audit.
Although such chances are bleak, a portion of EU accountants may at last need to surrender their jobs and return to their nation. A majority of accounting professionals voiced apprehension over jobs being shifted from the UK to EU. The principal concern seems to be over job stability, constricted opportunities, constraints associated with working abroad and a potential job loss as well when it comes to downsizing and cost-cutting.
It may be a bit early to evaluate Brexit’s effect on accountancy employment. But it is being broadly revealed that in these questionable circumstances, businesses, more so the ones with solid balance sheets and accounting reports are implementing investment cost-cutting and recruitment freezes. This can kindle a more profound crisis in the UK productivity.
Numerous reports have suggested outsourcing would be an excellent option and that Brexit would create a boom in the demand for accountancy outsourcing services as UK businesses progress forward to understand the situation. There would be a significant surge in workload connected with projections, revising forecasts, analysis of the impact on the markets, assessment of management figures, exchange rate disparities etc. There are many accountants who have already begun hiring surplus staff from outsourced accounting firms to deal with the liability of this extra paperwork.
Accountancy outsourcing can be extremely advantageous to control the productivity amidst this period of uncertainty. It enables you to access qualified staff at lower fixed costs and flexibly move your practice ahead. This could imply proper sorting out of works related to compliance and tax returns with the outsourced staff and focus on aiding and supporting businesses to tackle the challenges which Brexit has come forward with. Outsourced accounting firms can also assist you in quickly responding to the opportune chances without the restrictions of long-term employment contracts.
The governance encompassing VAT application was previously decided by the EU since it was their proprietary concept. With Brexit, the VAT policies are most likely to be modified. Hence, this would have a direct influence on the companies’ accounting practices. It is expected that the government would design a system that is distinguishable from the VAT system because of the fact that VAT is a continuous source of extensive income generation for the country.
Many of the consequences of Brexit remain obscure at this point, particularly around issues that focus on passport rights, tax and compliance. However, amongst all these apprehensions surrounding Brexit, one thing is very clear that in the coming times accountants have a crucial role to play with the sole objective in advising and assisting their clients on the financial and tax implications of the EU withdrawal.