The rules have changed – subsidiaries of ‘large’ European companies now need an audit
Prior to the UK’s departure from the European Union, there was an exemption that allowed UK subsidiaries of EU companies not to perform an annual audit. However, post Brexit, with the UK now outside the EU, this exemption no longer exists.
The previous audit exemption
While the UK was still a member of the EU, there was an exemption that allowed UK incorporated company subsidiaries of European Economic Area (EEA) parent companies not to do a statutory UK audit. The exemption relied on, amongst other matters, the EEA company guaranteeing the UK company. However, with the UK now outside the EEA, this is no longer the case.
Who now needs to do an audit?
This change applies to companies that are not part of a ‘small group’ and to accounting periods that started after 31 December 2020. Dormant companies don’t need to do an audit.
What constitutes a small group?
A small group is defined as ‘small’ if the group (including the EU holding company and all its subsidiaries) meet at least 2 of the following conditions:
- annual turnover must be not more than £10.2 million
- the balance sheet total must be not more than £5.1 million
- the average number of employees must be not more than 50
In this context, balance sheet assets means gross assets, not net assets. A company that was previously ‘large’ stops being large once it meets two of the above for at least two years. So having a “bad year” wont necessarily mean that the company doesn’t need to have an audit.
Carrying out audits
AccountsCo offers audit and assurance for UK branches of overseas companies. To find out more, please get in touch.
The rules have changed – subsidiaries of ‘large’ European companies now need an audit Prior to the UK’s departure from the European Union, there was an exemption that allowed UK subsidiaries of EU companies not to perform an annual audit. However, post Brexit, with the UK now outside the EU, this exemption no longer exists. […]