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In the United Kingdom, IFRS are required for the consolidated financial statements of publicly traded companies. Other than that, companies have some flexibility to choose the accounting framework they will use.
Unlisted British companies can choose to apply full IFRS or UK Generally Accepted Accounting Principles (UK GAAP), specifically IFRS 102, both for their consolidated accounts and for individual accounts (solus). In addition, subsidiaries can also prepare their individual accounts using IFRS or IFRS 102, benefiting, if they so choose, from a reduced reporting regime.
For small businesses and micro-entities, there are simplified accounting frameworks with lower filing and disclosure requirements. However, the choice of accounting framework is limited by the UK corporate legal framework, which requires consistency within the group when applying GAAP.
The United Kingdom maintains an extensive network of international agreements aimed at the exchange of tax information, in addition to treaties to avoid double taxation. It is also actively involved in OECD initiatives to establish more consistent and transparent global tax principles.
FATCA enforcement in the United Kingdom
With the objective of combating tax evasion by U.S. citizens and entities, the United States passed the FATCA law, which requires foreign financial institutions to identify and report on their American customers.
To implement these regulations, the United Kingdom signed an agreement with the U.S. Department of State in 2012, which came into effect through specific regulations. Since June 2014, all British financial institutions are required to comply with FATCA requirements. Failure to do so may face financial penalties and withholding on income from U.S. sources.
Common Reporting Standard (CRS)
In 2014, the OECD published the Common Reporting Standard (CRS), which establishes a global system for the automatic exchange of tax information between countries. This system requires financial institutions to collect and report information about non-resident accounts to tax authorities, who then share it with the appropriate jurisdictions.
The United Kingdom adopted the CRS through the International Tax Compliance Regulations of 2015, which came into effect in 2016. These regulations require financial institutions to record and communicate specific data about their account holders, in line with the multilateral commitments undertaken by the country. Failure to comply also entails significant penalties.
Since 2022, the OECD has introduced updates to the CRS, expanding the financial products covered and the data required, further reinforcing the scope of international tax cooperation.
In the United Kingdom, changes in tax legislation are usually announced at least once a year, mainly on Budget Day, when the government sets tax rates and other fiscal measures for the next financial year.
Traditionally, this event takes place in spring (March) or fall (October/November), although the date may vary. If a full budget is not made, the government may opt for a Spring or Fall Declaration, which is a shorter fiscal event.
The Minister of Finance has indicated his intention to limit himself to a single major fiscal event per year, which will be the Autumn Budget, complemented by a smaller declaration in spring. However, the government maintains the flexibility to modify this schedule depending on the circumstances.
Once the proposals are submitted, they are integrated into an annual Finance Bill, which becomes law after obtaining the Royal Sanction, officially becoming the Finance Act. This legislative process can take several months.
In addition, fiscal measures may be announced at other times of the year. As long as they are legally approved, they can take effect on specific dates. In election years or in exceptional economic situations, there may be more than one Budget or several Finance Laws in the same year.
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