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Does the EUAD require you to change tax service provider?

07 June 2019

The UK implementation of the EU Audit Directive (EUAD), in June 2016, has continued to have a significant impact on all insurance firms.  The Directive brought four main provisions into force:

  • mandatory audit rotation
  • restrictions on non-audit services
  • changes to the form and content of the audit report
  • new requirements for the role of the audit committee.

Restrictions on non-audit services

There is a list of prohibited non-audit services (‘blacklisted’) which cannot be performed by a PIE's statutory auditor, or any member of the statutory auditors' network. These services cannot be provided to the entity, its parent undertaking, or controlled undertakings within the EU. A limit will also apply for all non-audit services provided by a statutory audit of 70% of the average audit fee paid for the last three years.

Does this mean I am required to change tax service provider?

The simple answer is yes! Following the introduction of the EU Audit Directive two years ago, statutory auditors are not permitted to provide non-audit tax services to UK insurance undertakings and companies listed on EU regulated markets, in all but the most exceptional cases.

However, the true answer is a more complex decision. In applying the general blacklisted services rule, judgement should be used. For instance, tax services are defined as being blacklisted unless they have a clearly inconsequential effect on the financial statements. There is, however, no definition of inconsequential. Our opinion is that due to the nature of many tax services, typically most insurers would not know at the outset how significant the matter is until the tax expert has begun to investigate it. However a list of blacklisted tax services typically includes:

  • preparation of tax forms
  • provision of tax advice, including VAT and Insurance Premium Tax (IPT)
  • payroll tax
  • customs duties
  • identification of public subsidies and tax incentives unless support from the statutory auditor or audit firm in respect of such services is required by law
  • support regarding tax inspections by tax authorities unless support from the statutory auditor in respect of such inspections is required by law
  • calculation of direct and indirect tax and deferred tax.


This is having an enormous impact on the companies that need to abide by the EUAD. For companies that have had long relationships with their tax service provider the prospect of having to change provider can be daunting and uncertain. Also, companies are likely to be in position that they run out of options if they use too many of the potential pool of audit firms for blacklisted non-audit services.

How we can help

We pride ourselves on the breadth and depth of our insurance expertise, offering specialist and tailored support to industry participants and regulators, locally and internationally.

Our dedicated Insurance Tax team of industry experts provide advice to underwriters, P&I clubs and other mutuals, outsourcers, Lloyd’s and multinational insurers and brokers. We advise clients on their statutory requirements and the most efficient ways of fulfilling these obligations, as well as preparing their corporate tax returns. We also advise many organisations on the most tax-efficient ways to structure their affairs and ensure that all available reliefs are utilised. With tax legislation being an area of regular change, our specialist team also helps clients thrive in a changing world and stay abreast of the latest opportunities, as well as any potential pitfalls.

If you would like to find out more, please contact us to arrange a free ‘risk and opportunities meeting’ where our industry specialist tax advisors can discuss how your business is affected by the EU Audit Directive.