March 26, 2019
If the UK does fall on its face with their hands in their pockets by not agreeing to a formal withdrawal agreement by 29 March 2019 then its status under EU law would change from that of an EU Member State of the European Union to that of a third country. The consequences of this change would result in the UK being outside the Single Market and Customs Union and have no trade or co-operation agreements in place with the EU.
We at, John M Shanahan & Co, Chartered Accountants, Tullamore, Co Offaly have taken a look at the option of having a presence in Ireland.
There would be no transition period in which businesses can complete the necessary changes to accounting systems, compliance reporting and provide for the associated costs in adjusting to a new trading arrangement. Things will happen quickly and Advance planning by you is vital, otherwise your business will experience potential delays on imports or exports.
It is best to consider the worst-case scenario and their consequences than ignore; regardless of how the UK leaves, it should be clear that they are leaving the EU and there will be changes come what may given that leaving means leaving the current EU trade arrangements and facilities provided for under the Single Market and Customs Union.
It may make sense from a UK company’s perspective to establish a subsidiary in the Republic of Ireland.– in order to possibly provide access to the Common Market in the event of a hard Brexit.
However, while establishing an Irish subsidiary is a relatively straightforward and cost effective early move in hard-Brexit planning, when establishing a subsidiary in Ireland it is important to also think ahead to what happens after the UK leaves the EU.
Irish company law contains certain advantageous exemptions where Directors are resident in ‘the EEA’ and / or the Irish company is a subsidiary of a company that is resident in ‘the EEA’. The EEA stands for the European Economic Area, which comprises all EU member states, and also Iceland, Liechtenstein and Norway. It follows that in the event of a hard Brexit the UK will fall outside of the EEA.
Under S 137 of the Companies Act 2014 Irish companies are required to have at least one Director that is resident in the EEA. Therefore, while a UK business can quite easily establish an Irish subsidiary, with the same UK Directors, as of today, this would present a problem in the event of a hard Brexit. Where an Irish company does not have an EEA-resident Director, the company then has three choices:
Under S 299 of the Companies Act 2014, an Irish company is exempt from preparing consolidated financial statements where it is itself a subsidiary of a company registered in the EEA which prepares consolidated financial statements. It follows that where an Irish company is a subsidiary of a UK company and is relying on this exemption to avoid preparing consolidated financial statements in Ireland, it may no longer be in a position to avail of this exemption after a hard Brexit. .
Under S 357 of the Companies Act 2014, providing certain conditions are met, an Irish company can claim an exemption from filing its financial statements with the CRO, and instead file the consolidated financial statements of its parent company with the CRO, providing the parent company is registered in an EEA state. It follows that where an Irish company is a subsidiary of a UK company and is relying on this exemption to avoid filing its financial statements with the CRO, it may no longer be in a position to avail of this exemption after a hard Brexit.
We at JOHN M. SHANAHAN & CO. are here to help you with all your accounting, business, financial and taxation requirements, by providing expert, specialist and professional service tailored to meet your needs.