Dee Moran and Lilian Halpin explain entities’ existing obligations regarding beneficial ownership and look ahead to future developments, focusing on trusts in particular. Most entities have a legitimate role to play in the global economy, but they also have the potential for criminals to use the structure for money laundering, terrorist financing and other financial misconduct. To identify and increase the transparency of those that seek to hide their ownership and control of these entities, many countries have introduced a register of beneficial ownership. Having a register ensures that the ultimate owners/controllers are identified, and that accurate and up-to-date information on a beneficial owner is readily accessible to authorised officers and other competent authorities that are entitled to the information under money laundering legislation. In Ireland, entities must maintain a register to comply with obligations under the 4th EU Anti-Money Laundering Directive (4AMLD), which was passed in May 2015 and subsequently amended by the 5th EU Anti-Money Laundering Directive (5AMLD), which was passed in May 2018. Who is a beneficial owner? A beneficial owner is defined in the directives and Irish legislation by reference to the entity type (e.g. trust, corporate entity, investment limited partnership). The different pieces of legislation should be consulted depending on the entity. Common threads in the definitions are ownership and control, whether direct or indirect, and a holding of more than 25% of the entity. Are there two registers? There are two separate registers in Ireland. While companies were required since 2016 to gather information and maintain an internal register of beneficial ownership, the 2019 beneficial ownership of corporate entities regulations (one of two sets of regulations passed in 2019 relevant to beneficial ownership) required relevant entities to file information in a central register. The Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies, which falls under the remit of the registrar of the Companies Registration Office, was opened for filings in July 2019. Any companies/societies in existence on 22 June 2019 had until 22 November 2019 to file their beneficial ownership details, and the five-month timeline to register relevant entities remains. Similarly, certain other financial vehicles described below must maintain an internal beneficial ownership register. There are also legislative requirements to file information on the central register, the Beneficial Ownership Register for Certain Financial Vehicles. Under specific legislation, the Central Bank of Ireland is designated as the registrar responsible for maintaining this central register. Under EU anti-money laundering (AML) regulations that came into effect in 2020, Irish Collective Asset Management Vehicles (ICAVs), unit trusts and credit unions that were in existence when the AML regulations came into force were required to register by 25 December 2020. Under the Investment Limited Partnerships (Amendment) Act 2020, which was commenced recently, existing investment limited partnerships (ILPs) and common contractual funds (CCFs) have until 1 September 2021 to register. Under both pieces of legislation, new financial vehicles that come into existence following the legislation’s implementation have six months from the date of coming into existence to register. What details must be registered? The information that must be delivered to each registrar concerning each beneficial owner includes name, date of birth, nationality, residential address, and a statement of the nature and extent of the interest held or control exercised by each beneficial owner. For Central Bank registration, it must be stated if the person is currently a pre-approval controlled function (PCF) holder in the entity or at any other regulated financial services provider. For companies and industrial and provident societies, the 2019 regulations require a PPS number to be furnished for verification purposes. The 2020 Act also requires PPS numbers to verify the information delivered in the case of ILPs and CCFs. In the case of both registers, the registrar is not permitted to disclose PPS numbers and must store them securely. Relevant entities must keep the beneficial ownership register up-to-date, and this information must align with the information filed on the Central Register. Where change(s) occur, the entity has 14 days to deliver the information so that the relevant amendments are made to the Central Register. Who is entitled to access the information in the Central Register? There are two tiers of access to data in the Central Register: Unrestricted access to the information in the Central Register will be afforded to authorised officers within specific organisations (i.e. An Garda Síochána, the Financial Intelligence Unit of An Garda Síochána, the Revenue Commissioners, the Criminal Assets Bureau, the Central Bank of Ireland, and other Irish competent authorities engaged in the prevention, detection, or investigation of possible money laundering or terrorist financing. Restricted access to information in the Central Register will be made available to the general public and designated persons (e.g. a bank carrying out customer due diligence, save where the beneficial owner is a minor). Those with restricted access will be able to access the name, month and year of birth, nationality, country of residence, and the statement about the nature and extent of the beneficial interest held. The beneficial owner’s date of birth and address will not be available to those with restricted access. Data protection law Any information exchange and sharing mandated by the legislation must comply with data protection law. Personal data is defined in Section 69 of the Data Protection Act 2018, and information to be collected and held on the central registers can include personal data. The data protection obligations are expressly recognised in the 2019 Regulations and 2020 Act, both of which provide that the Data Protection Act 2018 shall apply to the access the registrar affords to a designated person and any member of the public in respect of the information in the central register. Sanctions Sanctions include a fine of up to €5,000 for a trustee and a fine not exceeding €500,000 or up to 12 months imprisonment in respect of corporate entities. Future developments It is expected that a separate central register in respect of the beneficial ownership of trusts will be implemented in due course, as required under the Directives. This is expected to materialise sooner rather than later – trust regulations published in 2019 already impose obligations on trustees to seek and obtain information from beneficial owners of trusts and establish internal registers of beneficial ownership. The Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2020 was signed into Irish law recently, and contains provisions in relation to trusts. It defines a “beneficial owner” and lists certain trusts that would be excluded from a future requirement to register. These provisions are being introduced in anticipation of the Minister for Finance introducing further regulation in the area and to address part of the overall transposition of 5AMLD into Irish law. In Dáil discussions on the provisions, the Minister made specific reference to the requirements in 5AMLD that all member states establish a central register of beneficial ownership of express trusts. On the international front, the Financial Action Task Force (FATF), an intergovernmental organisation that promotes policies to combat money laundering and terrorist financing and of which Ireland is a member, announced in February that it would review the global rules around beneficial ownership. The European Commission recently stated that it would closely monitor the setting up of the central bank account mechanisms and the beneficial ownership registers by member states to ensure that they are populated with high-quality data. The Directives require interconnection of member state registers, and work to interconnect the beneficial ownership registers has already started. The interconnection will be operational in 2021. Meanwhile, related EU regulation dealing with the EU Central Register’s technical specifications is expected to come into force soon. The requirement to keep and maintain a register for beneficial ownership is here to stay, and a central register for trusts will soon be a legal requirement. An understanding of the requirements is important if sanctions are to be avoided. An EU central register is imminent. This will put further pressure on individual countries to maintain registers with high-quality information, so expect the spotlight to continue to shine brightly when this comes into existence. Dee Moran is Professional Accountancy Leader at Chartered Accountants Ireland. Lilian Halpin is a Consultant at Chartered Accountants Ireland.

Dr Brian Keegan explains why having political deadlines isn’t always a good idea. Deadlines have always been a feature of commercial life, but the ubiquity of dates by which something must occur is a relatively recent facet of political life. Politics has always had its own cycles, from the duration of a monarch’s reign to recurring intervals by which general elections must be held. Mandatory due dates or precise intervals more often reflect an external rather than a domestic political imperative. In recent decades, commercial concerns over deadlines have spilt over into the political arena as government becomes bigger and more technocratic. Timeframes for decision-making are as much determined by foreign affairs as domestic factors. Having political deadlines isn’t always a good idea. While the obvious effect of imposing a deadline is to ensure the completion of a task, the act of establishing deadlines in itself may have a more subtle effect on the way we think about those tasks. Some years ago, researchers at the Carey Business School at John Hopkins University in the US carried out a study of how workers react to deadlines. They found that longer deadlines can lead people to believe that a particular assignment is harder than it actually is. That, in turn, can result in managers committing more resources to the work needed to meet the deadline. If this finding is correct, it suggests that the shorter the deadline, the less costly it might be to meet. The researchers also found that, when workers are faced with multiple deadlines (and few of us have the luxury to do only one thing at a time), people seem to prioritise less important assignments with immediate deadlines over more important pieces of work with more extended deadlines. There is an apparent human tendency to do what is urgent rather than what is important. While these findings have implications for management practice, they also have implications for the political system. The tendencies described by the researchers have been echoed in the handling by both the British and the European institutions of the Brexit process. The repeated extension of Brexit deadlines through 2019 created an impression that the process was more difficult than it actually was. In 2020, everything to do with the pandemic was urgent, so almost everything else received more political attention than the negotiations. Consequently, both sides allowed themselves extension after extension to negotiate the Trade and Cooperation Agreement, even though it should have been well within the capacity of Brussels and London to deal with both issues in parallel. The result was that we ended up with a barebones trade agreement between the UK and the EU, concluded on Christmas Eve. This outcome has been unnecessarily difficult for businesses to deal with. Customs and quality checks involve routine and paperwork – such processes may be unwelcome, but companies can generally cope with processes. The shortcomings are on the official side. The British Government is now repeating the same mistake by further pushing out deadlines associated with the Northern Ireland protocol and the checking of goods arriving into Great Britain from the EU. Far from relieving pressure on businesses, this will merely perpetuate the difficulties. It also makes the setting up of checks and controls by customs and trade officials and businesses alike appear more difficult. Political processes are rarely amenable to deadlines because the political process is not always about what should be done; it is also about what can be done. One of the lessons of Brexit is that we would be better served if the political process stopped trying to look like a business process.   Dr Brian Keegan is Director, Advocacy & Voice, at Chartered Accountants Ireland.

A recent C-suite barometer showed a surprising level of optimism among international business leaders. Mark Kennedy deciphers the findings to explain why short-term optimism will need to be buttressed by business transformation plans and long-term investment strategies if organisations are to thrive in a post-pandemic world. A report detailing over 500 global C-suite leaders’ views on their outlook for 2021 during a worldwide pandemic always had the potential to surprise. Despite the current economic uncertainty, the most surprising finding was the consistent presence of optimism globally, with 71% of respondents assessing the outlook for growth in 2021 as positive. At the beginning of the pandemic, we witnessed resilience and consistency as some business sectors adapted reasonably quickly. For established companies, there was a kind of ‘muscle memory’ approach to the crisis that unlocked lessons learned and business continuity measures that were initially adopted following the global economic crisis of 2008. Despite the unique nature of the pandemic, businesses that previously invested in crisis management strategies appeared to exhibit more resilience. The state approach to the pandemic was also a big differentiator, as tax and legislative aid mechanisms created a profoundly different context for business. Countries in Western Europe mostly saw the benefit of this approach. In contrast, other parts of the world, such as Africa, received noticeably less business aid, which resulted in less optimism for the future. Business transformation plans Confidence in managing and mitigating risk during the pandemic was undoubtedly a factor in respondents’ forward-looking business transformation plans. Economic and technology transformation trends scored highly, with 90% expecting to respond to technology and innovation trends and 78% confident in managing upcoming economic trends. Technology transformation was the most likely focus overall for large companies ($1 billion plus), with 54% of executives indicating a more-than-50% chance of implementing technology transformation plans. While the need to digitally transform businesses has been on the agenda for some time, the crisis appears to have accelerated plans. If we take the retail sector as an example, the need to meet the demand for online shopping during lockdown has added an urgency to prioritising digital strategies. Perhaps more surprising than what was high on the list of business transformation plans was what respondents considered a low priority. While the travel ban during lockdown highlighted the vast potential to reduce carbon emissions, only 20% of respondents said they expected climate risk to have the most significant impact on their business: the lowest on the list. This figure is slightly higher among Western Europe companies (25%), suggesting it is higher on executive agendas in that region. However, it is less than 20% in Latin America, Africa, Central and Eastern Europe and the Commonwealth Independent States (CEE/CIS), and the US.  One potential reason for climate risk attracting such a low score is the current lack of bottom-line accountability. Despite the growing need to mitigate climate change risk for business sustainability, leaders often treat it as an intangible business issue. They see it as being driven by regulatory momentum rather than a tangible business goal to be approached in the same way as technology or new service transformation plans. However, climate change will become a matter of profit and loss for many companies over the next ten years, either because it will influence how capital is obtained and the cost of infrastructure, or it will become an opportunity to do more business. It is a similar story with cultural change, which scored equally low on respondents’ business transformation plans. As mandatory reporting on environmental, social, and governance (ESG) issues becomes more widespread in both cases, businesses will need to consider these developments in business transformation plans. What is driving the business agenda? While technological transformation is the overarching theme, how businesses approach plans is often driven by regional and industry factors. In financial services, a high level of regulatory and compliance demands in Western Europe and the US is the driving force for banks and insurance companies launching digital strategies to automate and manage data management and reporting costs. In manufacturing, meanwhile, technology transformation drives improvements in efficiency and productivity. These regional differences were also evident when looking at investment plan timeframes. Businesses in Africa, for example, are looking at short-term transformation plans to drive profitability. In Europe and Asia, investment plans are put in place as strategic building blocks for the next decade and beyond. While this is not surprising when looking at the maturity of business development in each region, it also reflects the lack of state aid available to prop up economies and businesses in times of crisis. A further factor driving the business agenda is confidence in a company’s ability to respond to trends. In general, the barometer shows that businesses are optimistic in their ability to tackle most trends, with 90% either ‘very’ or ‘fairly’ confident in tackling challenges involving technology and innovation. Businesses in Asia-Pacific are more positive in their ability to respond to technology trends than in Western Europe, with 92% confident there compared to 85% in Western Europe, reflecting the vibrancy of the region’s technology start-up scene. However, executives are less confident in their businesses’ ability to respond to some other trends. 28% of companies are ‘not very’ or ‘not at all’ hopeful in dealing with the impact of climate change. This lack of confidence in responding to some trends may be down to the fact that, as discussed earlier, it is positioned lower down on the business transformation priority list. A further worrying response is executives’ lack of confidence to deal with social/political changes and public health challenges. While many businesses expect both trends to impact them in the next three to five years, a quarter of respondents are not confident in their ability to address them. Western European businesses are the least confident in dealing with social/political, climate and public health trends. Less than 65% declared themselves ‘very’ or ‘fairly’ confident for each. Asia-Pacific companies were much more optimistic than their Western European counterparts in responding to public health challenges – 77% of the former looked forward with optimism. This regional difference may reflect Asia-Pacific societies’ longer experience managing epidemics, like the SARS outbreak in 2003. Longer-term investment strategies It is important to recognise that the pandemic’s impact on investment plans is critical in moving from a short-term to longer-term outlook. The change in business priorities and how business is conducted since the crisis started has given CEOs across a wide range of sectors a clearer picture of why making long-term and sustainable investments is a sensible business decision. Interestingly, female respondents were more inclined to opt for longer-term investment strategies. Female leaders represent less than one-third of respondents, but with the number of female business leaders rising, the shift to longer-term investment planning is likely to increase. It signals a much-needed focus on long-term business sustainability. This shift to longer-term sustainability was highlighted by the number of respondents who consider investing in sustainability initiatives to be a relatively long-term business activity. It was rated the fourth longest-term out of 23 activities, behind external growth opportunities, corporate strategy, and research and development (R&D). However, company size and sector had an impact. For manufacturing companies, sustainability initiatives are the longest-term activity of all. This reflects the transition away from fossil fuels and towards more sustainable business models. Sustainability is seen as a long-term activity in the financial services sector, but sourcing new talent, government engagement, R&D, and maintaining IT systems are higher long-term priorities. It is interesting to note that sourcing new talent is seen as a long-term priority, particularly as the financial services sector is in a phase of disruption driven by technology and new entrants. While this may suggest that the industry sees sourcing new talent as increasingly difficult, it may also hint that financial services companies still see themselves as people industries first and foremost. The responses from technology and telecoms companies indicate that sustainability initiatives are viewed as one of the shortest-term activities in those sectors. External growth opportunities and regulatory issues are the two longest-term categories for this group, which considers acquiring customers as a longer-term activity than maintaining customers. It paints a picture of an industry that sees high growth as the key to its long-term and short-term future and one that is less concerned about its physical footprint and managing long-term external risks when compared to other, older industries. Of course, as new EU privacy laws become even more embedded, the technology sector may see regulation as both a short-term and long-term priority. Company size is a further factor. Larger ($1 billion plus) companies are most likely to consider sustainability as a longer-term business activity, reflecting that they have the resources to build a sustainability programme and the more significant external pressure on large and recognisable businesses to address sustainability issues. Executives from small- and medium-sized enterprises (SMEs) still regard sustainability as a relatively long-term activity, but R&D, corporate strategy, and external growth are viewed as higher long-term priorities. Framing a reset strategy What can we learn from the barometer results, and does it help frame strategies as companies look to reset? Looking at differences as well as similarities can give CEOs some bell-weather trends to consider. Take the fact that the barometer portrays businesses as generally optimistic. This helps provide momentum and confidence for the growth outlook, even though executives will consider different growth strategies and action pathways. It is then a question of looking at that growth landscape in more detail, so plans are more robust. Another key takeaway from the barometer is that businesses across the spectrum are prioritising driving technological change in one form or another. This could be implementing technology to transform and improve productivity, reduce costs, capture a business advantage from, say, increased online demand for products and services, or using it to enrich and enhance marketing strategies. Again, it is about capitalising on specific trends within the business sector. One aspect of technological change to keep in focus is the need to mitigate risk. With increasing complexity in the data and privacy regulatory landscape, it is crucial that – similar to technology transformation plans – risk mitigation remains high on CEOs’ agendas.   With the barometer also highlighting a growing appetite for ESG themes, it is essential to keep track of sustainability issues – particularly when reporting. ESG reporting is still not a high enough priority for CEOs, but it will demand greater focus from a risk management perspective in the future. Also not to be overlooked is the opportunity for businesses to create strategic business advantage by becoming an early adopter of, for example, environmentally friendly solutions or applying ESG as a business differentiator. Finally, a more oblique takeaway from the barometer’s high level of business optimism was the importance of investing in resilience. As we saw from government and company reaction at the beginning of the pandemic, lessons of the last economic crisis appeared to have been learned, particularly on the importance of continuity and making businesses more resilient to shocks. There are many examples of companies achieving business continuity success, whether through the ability to add flexibility in the supply chain or rapidly adapt products to meet changing consumer and business needs. It is clear that, where CEOs take the time to fully understand business and regulatory trends and invest in forward-looking strategies such as resilience and sustainability, charting a course out of the crisis will not be driven by short-term optimism alone but a realistic long-term growth strategy. Mark Kennedy is Managing Partner at Mazars in Ireland.

Although significant challenges remain, the north-west region can look forward to better days ahead, writes Dawn McLaughlin. After one of the most challenging years in business, 2021 provides some cause for optimism in the north-west city region. The vaccination rollout across the globe gives us the best chance to get back to normal and truly get our recovery efforts underway. As a Chartered Accountant in practice and in my new role as President of the Londonderry Chamber of Commerce, I have seen first-hand the extreme pressures on businesses. Cash reserves are depleted, cash flow is becoming a major concern, and confidence is gone. After a year of COVID-19, the strains on entrepreneurs and businesses of all shapes and sizes are only increasing. The need for a government-led recovery strategy, developed in collaboration with business, is greater than ever. However, I also see reasons for positivity on the horizon. While the double blow of the pandemic and Brexit seriously affected local businesses, I believe we can recover and rebuild better in 2021 and beyond, given the opportunity and support to do so. One of the rare highlights of 2020 was the announcement of the Graduate Entry Medical School at Ulster University’s Magee Campus in Derry. Representing the culmination of years of hard work and campaigning, the new medical school, which will welcome its first students in September 2021, illustrates the strength of the north-west’s higher education offerings. In the new post-Brexit world, cross-border cooperation and collaboration will be as important as ever. In collaborating with our neighbours in Donegal and beyond, we are working to make the north-west city region a more robust economy and the best place on the island to set-up a business. An Taoiseach’s new Shared Island Initiative provides the opportunity to maximise the tangible benefits of all-island cooperation. Committing €500 million over five years for cross-border projects, we are making a strong case for investment to fund infrastructure projects like the A5 Western Transport Corridor, funding to expand Ulster University’s Magee Campus and other cross-border research projects. Along with the full rollout of the City Deal project, the Shared Island Initiative can unlock our city region’s full potential and drive the post-pandemic recovery. By giving our leaders and businesses the tools to rebuild and create a more thriving and bustling regional economy, we can attract new investment and create new, secure jobs. But, in the short- and medium-term, this will require serious commitment and courage from the Northern Ireland Executive, the UK Government, and the Irish Government to get our struggling businesses on the whole island through this rocky period and ensure that they survive and thrive. With institutions like Ulster University Business School, North-West Regional College and Letterkenny Institute of Technology, the north-west is fertile ground for world-leading research and development, attracting more students to our region. Chartered Accountants in the north-west should prepare for this regional growth, and look to our local further and higher education institutions to provide a stream of high-calibre students who might well be the next generation of Chartered Accountants. Dawn McLaughlin is Founder of Dawn McLaughlin & Co. Chartered Accountants  and President of Londonderry Chamber of Commerce.

Having read the 1,246-page Trade and Cooperation Agreement, which was agreed to “in principle” by the EU and UK on Christmas Eve, Cróna Clohisey shares her thoughts on the critical elements causing concern and highlights areas that warrant further work. In recent weeks, there has been as much discussion about what the Trade and Cooperation Agreement (TCA) reached between the EU and UK on Christmas Eve doesn’t cover as what it does. The deal, spanning some 1,246 pages, threw up some surprises and certainly left a lot for discussion between the two sides in the months ahead. The main areas covered in the document include trade in goods and certain services, energy, aviation and road transport, fisheries, social security coordination, law enforcement, digital trade and intellectual property. Certain big-ticket items, including decisions relating to equivalence for financial services, the adequacy of the UK’s data protection regime, or an assessment of the UK’s sanitary and phytosanitary regime were excluded, however. These three areas, in particular, are unilateral decisions of the EU and were never subject to negotiation. The TCA does not govern trade in goods between Northern Ireland and the EU where the Protocol on Ireland and Northern Ireland will apply, bringing a whole other set of rules – not least in customs and VAT. Implementing, applying, and interpreting the TCA falls to the newly created Partnership Council. This political body will be co-chaired by a European Commission member and a UK government minister, and decisions will be made by mutual consent. Several specialised committees, including a trade partnership committee, will assist the Partnership Council. Therefore, it seems that negotiations between the EU and the UK on their future relationship are set to continue long into the future.  In this article, I will look at the TCA elements that are causing concern or require further work. Trade in goods and customs The real test for cross-border trade between the UK and EU is really just beginning, given that traffic at ports and borders is generally quieter in the weeks after Christmas. Still, problems with paperwork (which could never be removed by a free-trade agreement), health checks and systems were reported by many companies in the first few weeks of the year. We have heard reports of large retailers reporting shortages on their shelves with retailers in Northern Ireland significantly affected given the customs declarations required for goods brought into Northern Ireland from Great Britain – a requirement that seems to have taken some by surprise.   The TCA’s chapter on rules of origin is particularly cumbersome and has already hampered, and is expected to continue to hamper, existing supply chains. The ‘zero tariffs, zero quotas’ headline celebrating free trade is not all it seems, particularly when only eligible goods qualify for this approach. Rules of origin determine a product’s economic nationality and where products ‘originate’ is the fundamental basis for determining if tariffs apply. The TCA says that for products to benefit from zero tariffs and zero quotas, goods must be wholly obtained from, or manufactured, in the EU or UK or be substantially transformed or processed in the EU or UK in line with the specific origin rules that apply to the product being exported. Minor handling, unpacking and repacking won’t qualify as sufficiently processed. There could be issues for goods not wholly grown, farmed, fished or mined in either the UK or EU.  The amount of non-originating materials (i.e. materials not originating in either the EU or UK) that a product can have in order to still benefit from the TCA differs depending on the product. The annexes to the TCA set out the product-specific rules, and you will need to identify the commodity code as a starting point. Some products allow a maximum level of non-originating content (e.g. 50% of the ex-works selling price), but again this varies from product to product. If, for example, products are processed in the UK, the TCA states that EU origin materials and processing can be counted when considering whether UK exports to the EU meet rules of origin requirements. There is a qualifying production level, for example, called ‘cumulation’. Another nuance is that some rules of origin require that non-originating inputs used in the production of a good must have a different tariff heading, while some rules require a specific operation to take place in the UK for the goods to be classed as being of UK origin. For certain chemicals, for example, a chemical reaction must occur in the UK. It’s also important to remember that when goods are exported from a customs territory, origin status is lost (preferential origin status can only apply once). Take leather shoes originating in Spain as an example. When the shoes move from Spain to Great Britain and are then shipped to Ireland, they lose their EU preferential origin status when they leave Great Britain. Because they haven’t been processed or altered in Great Britain, they don’t have UK origin. Therefore, unless the goods move under a special and complicated customs procedure, duties arise on the goods entering Ireland. The now infamous case of Marks & Spencer’s Percy Pig confectionery is an example of this issue. These issues add to supply chain headaches and give rise to hidden costs. The rules are undoubtedly complex and don’t suit the UK’s significant role as a distribution hub. Business travel Free movement of people between the EU and UK ended on 1 January 2021. Of course, Irish and UK citizens are still free to live, travel and work in either country under the rules of the Common Travel Area (CTA). Beyond this category of people, immigration requirements – including securing permission to work and restrictions on the activities that can be performed as business travellers – are now a key consideration for UK nationals moving throughout the rest of the EU, including UK citizens residing in Ireland. Similar policies are in place for EU nationals seeking to travel to, and work in, the UK. The CTA allows short-term business visitors to enter either jurisdiction visa-free for 90 days in any given six-month period, but there are restrictions on the activities that can be performed. Activities such as meetings, conferences, trade exhibitions, and consultations are allowed. However, anything that involves selling goods or services directly to the public requires a work visa. The specific business situations where a visa is required are set out in the annexes to the TCA. The environment In a first for the EU, the fight against climate change has been included as an “essential element” in a bilateral agreement with a third country. This effectively means that if the EU or the UK were to withdraw from the Paris Agreement or take measures defeating its purpose, the other side would have the right to suspend or even terminate all or part of the TCA. The TCA paves the way for a joint framework for cooperation on renewable energy and other sustainable practices, as well as the creation of a new model for energy trading. However, it allows both sides to set their own climate and environmental policies in areas such as carbon emissions/carbon pricing, air quality, and biodiversity conservation. Divergence from respective environmental and climate laws will be monitored, but this area is not subject to the TCA’s main dispute resolution mechanism. It will instead be governed by a ‘Panel of Experts’ procedure. Time will tell how effective this will be. Data transfers Many businesses rely on the ability to transfer personal data about their customers or employees to offer goods and services across borders. A company based in Belfast, for example, might outsource its payroll processing to a company based in Galway. In this case, any restriction on this data’s ability to flow freely would act as a trade barrier. The EU and UK haven’t concluded a deal yet to allow data to continue to flow freely across borders, but the EU has committed to a decision on the adequacy of the UK’s system (UK GDPR) by 30 June 2021. Until then, the UK will be treated as if it is still part of the EU on data protection grounds, and data can continue to flow freely between jurisdictions. If the EU doesn’t reach an adequacy agreement (although reports suggest that a deal is close), provisions such as standard contractual clauses may be needed in future transfers of data between the UK and EU. Financial services Currently, the UK has identical rules to the EU in terms of the regulation of financial services. Supplementary documentation published with the TCA states that the UK Treasury and European Commission aim to sign a cooperation agreement covering financial services regulation by March 2021. The EU has already deemed the UK equivalent for a time-limited basis in clearing and transaction settlement, while the UK has provided the EU with specific findings that would enable EU member states to conduct such business in the UK. Many other areas of the TCA will be digested and interpreted in the weeks and months ahead. Trade deals are predominantly about trade. Only time will tell if they go far enough in other areas such as environment, security and intelligence, or healthcare, for example. Let’s hope that in the long run, a deal is better than no-deal. POINT OF VIEW:  Barry Cullen, Silver Hill Duck Silver Hill Duck is a perfect example of a cross-border business and the various challenges posed by the new trading relationship between the EU and the UK. Silver Hill Duck is a duck manufacturing company based in Emyvale, Co. Monaghan, with operations in Northern Ireland and the Republic of Ireland. The company controls all aspects of the breeding, farming, production and packaging of its famous Silver Hill Duck breed. Established in 1962, it has supplied the best Chinese restaurants in the UK for the past 40 years. During this time, the company has expanded its customer base to include retail and foodservice, including a range of raw and cooked products. Barry Cullen, Head of Sales at Silver Hill Duck and President of the Irish Exporters Association, shares the background to his company’s commercial decisions. “The UK was historically our largest market, and we took some steps before 1 January 2021 to avoid the expected delays that were predicted at the ports. This involved setting up a Northern Ireland company with the appropriate VAT and EORI numbers, and a customs clearance agent to handle the paperwork. Silver Hill also had to source a warehousing partner in the UK that could hold frozen stock for our UK customers. Trading with our fresh retail customers was suspended for the first few weeks in January due to the uncertainty around delays at ports and the documentation required. The first few weeks of 2021 has shown that this was a prudent decision, as it has become apparent that the UK is nowhere near ready for the new trading requirements. There are major delays at Holyhead with hauliers unable to access the Irish market due to incorrect paperwork and a COVID-19 testing regime that has exacerbated the problem. It’s a case of learning on the job as our sales team feels its way through the many documentation requirements to send a pallet of product to the UK. For example, despite having done due diligence for over three years, we were not aware of the REX system and the need to be registered to self-certify our goods. Even though there are no actual tariffs, the customs clearance costs are high at approximately €120 per order, regardless of size, if you act as exporter and importer for the UK customer. This will make much retail business commercially unviable and will have a significant knock-on effect on small- and medium-sized enterprises in the coming months. There will undoubtedly be a settling-in period for the new trading requirements, but the cost for traders, hauliers and suppliers is as yet uncertain.”   Cróna Clohisey is Public Policy Lead at Chartered Accountants Ireland.

Do ultra-low interest rates justify ultra-high stock market values? Cormac Lucey shares his thoughts as US tech stocks continue their astonishing rise. Are we experiencing a stock market bubble? The question arises because of the startling rebound in global stock market indices since last March and, in particular, because of the astonishing rise in value experienced by US tech companies. Since their March lows, the Nasdaq has nearly doubled, the NYSE FANG+ Index has risen by 150%, and Tesla has risen to an astounding 12.2 times its starting position. The other factor that suggests we are in the middle of an equity bubble is valuations. The best measure of underlying long-term valuation is the Cyclically Adjusted Price Earnings (CAPE) ratio. It overcomes the weakness of the traditional Price Earnings (PE) ratio, that cyclically inflated earnings can make a cyclically inflated price look reasonable, by replacing one year’s earnings with average earnings over the previous 10 years, adjusted for inflation. The US CAPE is currently 35. That level has only ever been seen before as the Nasdaq bubble peaked in 2000. After that, the US tech index fell by three quarters before eventually bottoming in early 2002. On one hand, Jeremy Grantham, founder of the GMO fund management group in Boston, reckons that US stock markets are in the final stages of a speculative bubble worthy of comparison with the dot-com bubble, the Great Crash of 1929, and the South Sea Bubble. On the other, Martin Wolf, a Financial Times columnist, doesn’t believe that we are currently experiencing a stock market bubble. He contends that equity prospects depend on the future course of corporate earnings and interest rates. He concludes that, provided the former are strong and the latter ultra-low, stock prices look reasonable. There’s the rub. Do ultra-low interest rates justify ultra-high stock market values? And how long will interest rates remain ultra-low? On the face of it, the value of equity assets should rise as interest rates fall. Interest rates are a vital component of valuation models in general, and the Capital Asset Pricing Model in particular. When interest rates fall, the discount rate used in these models decreases and the price of the equity asset should appreciate, assuming all other things remain equal. Today’s interest rate cuts by central banks may therefore be used to justify higher equity prices and CAPE ratios. But John Hussman, a fund manager and former professor of finance, argues that when people say extreme stock market valuations are “justified” by interest rates, they’re actually saying that it’s “reasonable” for investors to price the stock market for long-term returns of nearly zero because bonds are also priced for long-term returns of nearly zero. “What’s actually happening today,” he argues, “is that investors are so uncomfortable with near-zero bond market valuations that they’ve priced nearly every other asset class at levels that can be expected to produce near-zero, or negative, 10-12 year returns as well.” I agree with Hussman: US stocks are in a bubble. While equities may appear reasonably valued relative to bonds, in absolute terms their ultra-high valuations today suggest ultra-low investment returns over the coming 10-12 years for those who buy them now and hold onto them for several years. However, just because stocks are in a bubble doesn’t mean that they are about to fall. As the then-Taoiseach, Bertie Ahern, said in 2006: the boom can get boomier. What should investors do? First, expect significant growth in short-term stock market volatility. The recent one-day 25% drop in the price of Bitcoin may be a straw in the wind. Second, the final market top may coincide with central banks allowing long-term interest rates to rise in the face of rising inflation expectations, perhaps in 2022. Until then, enjoy the boom getting boomier. Cormac Lucey is an economic commentator and lecturer at Chartered Accountants Ireland.

With international tax reform progressing at unprecedented speed, Susan Kilty explains why Irish businesses must continue to participate actively in the discussion. With all the global uncertainty that Ireland is facing due to COVID-19 and Brexit, there is a risk that the OECD global tax reforms – the other major threat to Irish business and the economy – will be pushed further down the corporate agenda. But to do so would be very risky. Ireland must engage with this process now, at both the political and corporate level. The world of international tax is in a state of extreme flux as governments grapple with changes in the way multinationals do business. It is worth reiterating that Ireland has attracted healthy levels of foreign direct investment (FDI) over the past 30 years, and the multinational community has contributed significantly to our economic success. According to the OECD, Ireland received more foreign direct investment in the first half of this year than any other country. Along with Ireland’s near-iconic 12.5% tax rate, a crucial element in our continuing ability to attract international investment is the stability and transparency of the corporate tax regime here. Investors from abroad who establish activities in Ireland tend to be quite sensitive to changes in the taxation system. They like certainty and stability in a tax code, which is why Ireland presents such an attractive proposition. Ireland cannot afford to lose FDI as a result of turbulence in the global tax landscape at this time. As corporation tax accounts for almost 18% of Ireland’s total tax take, any change to the regime threatens to seriously undermine the attractiveness of our FDI model and negatively impact our revenue-raising ability. The crux of the matter is that we, and many other countries, apply 20th century tax systems to 21st century e-commerce business models. Businesses have an increasingly digital presence, and many no longer trade out of brick and mortar locations. This is not limited to so-called technology companies, but can be seen across industries and in businesses of all sizes. Businesses sell freely across borders without ever needing to set up operations abroad. This new digital way of trading is not always captured in our analogue tax rules, and the rules must be realigned with the reality of modern e-commerce. However, to tax a multinational business, you need a multinational set of rules. This is where the OECD comes in, but the uncertain shape that the new rules might take brings more uncertainty for businesses at a time when it is least needed. Many clients cite the changing international tax environment as one of the top threats to potential revenue growth. And although countries now face enormous bills for COVID-19, one sure thing is that BEPS, OECD and tax reform will not go away. International corporate tax reform is happening, and it will impact many businesses and our economy. Companies need to stay on top of these changes and prioritise the issues that will affect them. OECD proposals The OECD proposals offer a two-pillar solution: one pillar to re-allocate taxing rights and ensure that profits are recorded where sales take place, and a second pillar to ensure that a minimum tax rate is paid. At the time of writing, a public consultation is open for stakeholders to share their views with the OECD on the proposals that were recently summarised by way of two “blueprint” documents, one for each pillar. Pillar One seeks to give market jurisdictions increased taxing rights (and, therefore, increased taxable income and revenues). It aims to attribute a portion of the profits of certain multinational groups to the jurisdictions in which their customers are based. It does this by introducing a new formulaic allocation mechanism for profits while ensuring that limited risk distributors take a fair share of profits. Several questions remain as to how the Pillar One proposals, which constitute a significant change from the current rules, will be applied. Pillar Two, on the other hand, seeks to impose a floor for minimum tax rates across the globe. This proposal is very complicated. It is much more than a case of setting a minimum rate of tax. It is made up partially of a system that requires shareholders of companies that pay low or no tax to “tax back” the profits to ensure that they are subject to a minimum rate. At the same time, rules will apply to ensure that payments made to related parties in low-tax-paying or no-tax-paying countries are subject to a withholding tax. Finally, it can alter the application of double tax treaty relief for companies in low-tax-paying or no-tax-paying countries. Agreeing on the application and implementation of this pillar will be incredibly difficult from a global consensus point of view. Several supposed “safety nets” in Pillar Two are also likely to be of limited application. For example, assuming that the minimum tax rate is set at 12.5%, this does not mean that businesses subject to tax in Ireland will escape further tax. Similarly, assuming that the US GILTI (global intangible low-taxed income) rules are grandfathered in the OECD’s proposal, this does not mean that the US GILTI tax applies as a tax-in-kind tax for Pillar Two purposes. Pillar Two poses a significant threat to Ireland, as it reduces the competitiveness of our 12.5% rate to attract FDI and, coupled with the Pillar One profit re-allocations, could reduce our corporate tax take. The OECD estimates that once one or both of the pillars are introduced, companies will pay more tax overall at a global level, but where this tax falls is up for negotiation – and this is why early engagement by all stakeholders is critical. While the new proposals will undoubtedly have an impact, it is not certain that Ireland’s corporation tax receipts will fall off a cliff. Ireland has already gained significantly in terms of investment from the first phase of OECD tax reform, and this has helped to drive a significant increase in corporate tax revenue. But the risks must nevertheless be addressed. There is, of course, the risk that the redistribution of tax under the rules directly under Pillar One and indirectly via Pillar Two will impact our corporate tax take. But even if the rules have no impact on a company’s tax bill, they could still impose a considerable burden from an administrative perspective, and the complexity of the rules cannot be overestimated. At a time when businesses are grappling with other tax changes, led by the EU and domestic policy changes, this would be a substantial additional burden on the business community. The OECD is progressing the rules at unprecedented speed in terms of international tax reform. The momentum behind the process comes from a political desire for a fair tax system that works for modern business. However, does this rapidity risk the international political process marching ahead of the technical tax work? This is where Ireland, both government and corporate, needs to play a vital role. While the consultation period on both pillars is open, the focus for stakeholders should be on consulting with the OECD on the technical elements of its plan. Considering the OECD’s stated objective to have a political consensus by mid-2021, this could be one of the last opportunities for stakeholders to have a say in writing the rules. The interplay between the OECD and the US Treasury cannot be ignored when considering the OECD’s ability to get the proposals over the line. The US Treasury decided to step away from the consultation process with the OECD for a period in mid-2020. This, of course, raised questions around whether the OECD proposals could generate a solution that countries would be willing to implement. Added to this, the OECD has always positioned Pillar One and Pillar Two as an overall package of measures and has stressed that one pillar would not be able to move forward without the other. The “nothing is decided until everything is decided” basis of moving forward is a risky move, but the OECD recently rowed back on this stance. If the OECD fails to reach a political consensus by 2021, we could very well see the EU act ‘en bloc’ to introduce a tax on companies with “digital” activities. This could result in differing rules within, and outside of, the EU. It would also increase global trade tensions, all of which would not be good for our competitiveness. As a small open economy, Ireland will always be susceptible to any barriers to global trade. A multilateral deal brokered by the OECD therefore remains the best option – the last thing we want to see is the EU accelerating its own tax reform or, worse still, countries taking unilateral action. For the Irish Government, providing certainty where possible about the future direction of tax is critical. Where we have a lead is in how we provide that stability and guidance where we can. The upcoming Corporate Tax Roadmap from the Department of Finance will be an opportunity to give assurances in these uncertain times. Next steps for business The public consultation will be critical for businesses to have their say in shaping the rules. Ireland Inc. must continue to engage constructively with the OECD to try to shape the outcome so that we maintain a corporate tax system that is fit for purpose, is at the forefront of global standards, and works for businesses located here. Doing so would ensure that we articulate the position of small open economies like our own. Each impacted business must take the opportunity to comment on the proposals, as this may be the last chance to have a say. Indeed, what comes out of the consultation period may be the architecture of the rules for the future. We know that difficult decisions must be made at home and abroad in terms of the new tax landscape, and made with additional pressures we could not have foreseen 12 months ago. Although it may seem that much is out of our control, Irish businesses must continue to participate actively in the discussions and ensure that their concerns are heard. The game may be in the final quarter, but the ball is in our hands. Susan Kilty is a Partner at PwC Ireland and leads the firm’s tax practice. Point of view: Fergal O'Brien Since the start of the BEPS process in 2013, Irish business has recognised the importance of the work to our business model and the country’s future prosperity. At its core, BEPS has seen a further alignment of business substance and tax structures at a global level. This has resulted in an often under-appreciated surge in business investment, quality job creation and, ultimately, higher tax revenue for the Irish State. With its strong history as a successful location for foreign direct investment, and substance in world-class manufacturing and international services, Ireland was well-placed to benefit from the new global order. The boom in business investment, which last year reached over €3 billion every week, and increase in the corporate tax yield from €4 billion in 2013 to €11 billion in 2019, are evidence of the further embedding of business substance in the Irish economy. The current round of BEPS negotiations will have further significant implications for the Irish economy, and particularly for the rapidly growing digital economy. Ibec is working directly with the OECD to ensure that any further changes to corporation tax recognise the central role of business substance and locations of real value creation. Fergal O’Brien is Director of Policy and Public Affairs at Ibec.  Point of view: Norah Collender The OECD’s proposals to address the challenges of the digitalised economy will have a disproportionate negative impact on small, open exporter economies like Ireland. Earlier consultation papers issued by the OECD on taxing the digitalised economy suggested that smaller economies could benefit from international tax reform emanating from the OECD. However, the OECD now openly admits that bigger countries stand to benefit from its proposals more than smaller countries, and the carrot has turned into the stick in terms of what will happen if smaller countries do not support the OECD. Ireland is acutely aware of the dangers ahead if countries take unilateral action to achieve their vision of international tax reform. But that does not mean that countries like Ireland should be rushed into accepting international tax rules that fundamentally hamstring Irish taxing rights. Genuine consensus must be reached to ensure that international tax reform is sustainable in the long-term. Likewise, the new tax rules must be manageable from the multinational’s perspective and from the perspective of the tax authority tasked with administrating the rules. A rushed outcome to the important work of the OECD will make for tax laws that participating countries, tax authorities, and the all-important taxpayer may not be able to withstand in the long-term. Norah Collender is Professional Tax Leader at Chartered Accountants Ireland. Point of view: Seamus Coffey How Pillar One and Pillar Two of the OECD BEPS Project will ultimately impact Ireland is uncertain. One sure thing, however, is that there will be changes to tax payments. This will be a combination of a change in the location of where taxes are paid and perhaps also an increase in tax payments in some instances. But there will likely be both winners and losers. From an Irish perspective, there might have been some comfort in that the loser could have been the residual claimant – the country at the end of the chain that gets to claim taxing rights on the profits left after other countries have made their claim. As US companies are the largest source of Irish corporation tax revenue, it might have been felt that most of the losses would fall on the US. However, significant amounts of intellectual property have been on-shored here. Ireland, therefore, has become a residual claimant for the taxing rights to some of the profits of these companies. At present, Ireland is not collecting significant taxes from these profits as capital allowances are claimed. If BEPS results in a significant reallocation of these profits, we might never collect much tax on them. Seamus Coffey is a lecturer in the Department of Economics in University College Cork and former Chair of the Irish Fiscal Advisory Council.

Torunn Dahl and Glenn Gillard share the secrets to purposeful inclusion, which in these challenging times is more important than ever. Good leadership has never been easy. If it were, we would all be good leaders most of the time and organisations would not need to spend millions each year developing leadership skills. In reality, leadership is always a delicate balance of making the best decisions possible given the information to hand while taking into account the context, the strategic imperatives of the organisation, and the stakeholders involved in or impacted by the decisions being made. Operating in an environment of enormous unpredictability, wrought by a pandemic, makes this challenging task even harder. Never before has that well-worn phrase from financial services advertisements, ‘past performance does not guarantee future success’, been truer. There is no quick guide to leadership for these times. We can choose many possible routes to survive or thrive in the period ahead, as we learn to operate in an environment of ongoing uncertainty and volatility. This article will outline some steps you can take to ensure the route you choose is one of inclusive leadership, to the benefit of all your key stakeholders. A new social contract In the August issue of Accountancy Ireland, our colleagues outlined how people at the start of their accountancy careers seek a broad sense of purpose in the work they do. Similarly, in society, we have seen a significant change in people’s awareness of – and lack of tolerance for – the inequalities that exist in society. There is an opportunity to reset the path we are on as a society, to reduce systemic inequalities and become more purpose-led. Last year, 200 global CEOs, including Punit Renjen of Deloitte, signed a statement of purpose. It confirmed that a corporation’s purpose is to serve all its stakeholders – employees, clients and society. The COVID-19 pandemic and the Black Lives Matter movement have reinforced the message from the general public that business cannot be a neutral bystander. Business should, and can, be at the heart of this new social contract, and business leaders need to embrace this change. This reset to how society operates and meets the expectations of its citizens will require different types of leaders to navigate and drive the changes. In addition to the critical skills associated with good leaders such as strategic thinking, commercial acumen, decisiveness and effective communication, leaders will need to understand how to be genuinely inclusive in a broad sense. They will need to understand how a change to the social contract could impact their talent pipelines, customer relationships and supply chains. How will the decisions they make today impact their ability to retain customers, attract staff, reduce their carbon impact and sustain their business viability into the future? A model of inclusive leadership provides a framework for leaders to think about the thought process and the actions they need to consider to navigate the difficult decisions they now face. In the section below, we outline the six signature traits of an inclusive leader, as identified by Deloitte, and some suggested practical steps a leader can take to operate inclusively. The six signature traits Inclusive leadership is about treating people fairly and leveraging the thinking of diverse groups of people. While leaders must treat their people fairly, a genuinely inclusive leader in a new social contract will seek to ensure that people outside the organisation are also treated fairly. They will do this by providing opportunities for them to join the organisation or sell their goods/services to the organisation on fair terms. The examples below focus on what an inclusive leader can do inside their organisation. 1. Commitment. Highly inclusive leaders are committed to the inclusion agenda because these objectives align with their personal value systems and because they believe in the business case and moral case for inclusion. Practical steps: Put inclusion on the agenda at your meetings and hold people to account on actions agreed. Set targets, and encourage debate and discussion around what the right targets are and how to meet them. Attend diversity and inclusion events within and outside your organisation. Share new knowledge with your teams and outline the actions you will take. Reference an inclusion story or moment as part of every presentation you make. 2. Courage. Highly inclusive leaders speak up and challenge the status quo. They don’t walk past inequality; they challenge it. They are willing to admit to their own vulnerabilities and remain humble about their strengths and weaknesses. Practical steps: Speak up and challenge any inappropriate behaviour you see or hear. Others may feel equally uncomfortable and are likely watching to see whether you condone (through silence) or challenge the behaviour. Apply a diversity lens to everything you do – use a checklist if necessary as a prompt. Think about your next event or meeting. Who is talking? What images are being presented? Which metrics are being used? Do they all support an inclusive environment? 3. Cognisance. Highly inclusive leaders are aware that they, and everyone else, have biases that impact their judgement. They seek to ensure that processes are put in place to manage and overcome these blind spots and to create fairer opportunities for all. Practical steps: Seek to identify your own biases. Take the Harvard Implicit Association Test or pay attention to who you naturally gravitate towards and with whom you feel less comfortable. Pay attention to your inner voice and initial judgements and ask yourself whether biases are coming into play. We all have them! Use structured processes and criteria when making decisions that relate to people (hiring, promotions or performance, for example) to ensure objective criteria are used rather than generalised impressions. 4. Curiosity. Highly inclusive leaders keep an open mind and have a desire to learn more about others. They want to understand how they view and experience the world. They also demonstrate tolerance for ambiguity and change. Practical steps: Seek out someone on your team you don’t know well or who has a different background to yours. Put in time for coffee to connect and learn more about them. They could be the perfect person for your next project or have valuable perspectives on a problem you’re grappling with. Invite different people to present to your team or organisation to broaden everyone’s perspective. Remember to suspend judgement when listening to other perspectives; seek to listen actively and understand. Acknowledge what they are saying and respect their viewpoint. 5. Cultural intelligence. Highly inclusive leaders are confident and effective in cross-cultural interactions. They may feel uncomfortable in the situation but are willing to move out of their comfort zone and focus on learning, seeking to build their cultural intelligence. Practical steps: Start by focusing on a culture or area that interests you. Search for articles and podcasts that will broaden your understanding and seek out people who can answer your questions and build on what you have learnt. Encourage people within your teams and organisation to build out their cultural intelligence, supporting mobility opportunities where relevant. 6. Collaboration. Highly inclusive leaders empower individuals to deliver their best, in addition to working across diverse groups of people to drive better solutions built from a diversity of thought. Practical steps: Let others speak first. Ensure that you have heard from everyone in the group, actively encouraging people to contribute if they haven’t already done so. Find common ground and articulate a shared purpose and objective for the group that everyone can rally around. Create physical and/or virtual opportunities for interactions that encourage sharing and collaboration. Purposeful inclusion in a pandemic The COVID-19 pandemic presents both challenges and opportunities in building an inclusive culture and following-up on commitments our businesses have made to be more inclusive. The last few months have stretched everyone and how we act as leaders, now and in the months ahead, will influence how well our organisations, our people, and we personally come through this pandemic. It may be tempting to take a short-term view and focus solely on profits and cash flow to the detriment of suppliers, employees and the local community. But those who take a longer and more inclusive view are likely to reap the rewards, as will their communities. As organisations transition to being more purpose-led than solely profit-focused, their ability to navigate the current environment inclusively to the benefit of society more broadly will be a real test of their authentic commitment to this cause. Using the traits above, we will now explore some of these challenges and opportunities. Commitment: In the short-term, it is easy to step away from the commitments we have made. Many organisations have implemented, or are looking at, measures such as reducing headcount, suspending bonuses and promotions, and deferring hiring decisions. It is important to consider these decisions in the context of inclusion and look at how these measures are implemented and affect the future shape of the organisation. During the last recession, we saw a significant reversal of some of our key diversity measures, as women stepped away from the workforce to work in the home and as many employers reverted to traditional talent pools for staff. Cognisance: Biases can quickly step back into our thinking when faced with tough decisions or working under pressure. In the working from home environment, anecdotal research already indicates biases towards female participation. As women are traditionally viewed as the primary home-maker the risk of ‘killing with kindness’ escalates as individuals make assumptions as to whether someone can handle the workload or should be given specific work because of their family situation. While having progressive policies to support people during the pandemic has been important, this must be monitored so that it does not feed through to future decisions around performance, promotion and recognition. We must recognise, and seek to work through, these potential biases. Collaboration: During this pandemic, many organisations have reported increased engagement from staff and a greater sense of belonging. However, as the lockdown measures persist and remote working is more prolonged, maintaining a sense of ‘team’ and keeping people connected becomes a more significant challenge. Through organisation-wide collaboration, new models and methods for engagement, networking and social interaction can be developed. Indeed, there is a real opportunity to break away from our default methods of corporate social interaction in Ireland, which focus heavily on the dinner and pub scene and favour those willing (and able) to socialise after hours. Capturing new ways of interacting and building them into a new, more inclusive culture is an opportunity to redefine the workplace for many that traditionally felt excluded. Courage: Undoubtedly, the forced working from home arrangement arising from the pandemic presents a real opportunity to rethink how we look at biases around presenteeism, flexible working, and the office culture, and to re-imagine fundamentals like the daily commute and international travel. While these benefits seem obvious at this point, it will require courage to stay the course and implement the necessary changes so that these benefits can be retained as we move out of the pandemic. For example, if we are to move to more hybrid models with a greater level of remote working mixed with in-office teams, maintaining the inclusiveness of a meeting for those in-office and those at home will need to be supported by real leadership. The fear that we fall back into the old ways, where if you are not in the room you are not really participating, is already being expressed by many as they assess whether they could continue to work remotely into the future. Redefined leadership The relationship between community, employees and businesses has changed, and as leaders, we will be held accountable by our people. Truly inclusive leaders will thrive in this environment and make an impact not just within their own business, but across the community. The pandemic has challenged the way we look at the world and our role within it. We now need to seize the opportunities presented, and avoid the pitfalls, to create more inclusive organisations.  Torunn Dahl is Head of Talent, Learning and Inclusion at Deloitte. Glenn Gillard is a Partner at Deloitte and member of Council at Chartered Accountants Ireland.

Rachel Hussey explains how well-defined and inclusive work allocation practices can boost your colleagues’ career potential. One of the most common and unconscious ways in which old hierarchies are preserved in professional services firms is through the allocation of work, often at the early stage of careers. A well-defined work allocation process ensures a balanced portfolio of experience for future progression. But suppose a person is consistently allocated more challenging projects involving novel issues or premium clients. In that case, their career path is likely to take quite a different course to that of a person assigned more routine tasks, which can result in tremendous and unintended damage to the career paths of individuals. Research conducted by McKinsey in the UK in 2012 across professional services firms found that a man was three times more likely to be made a partner in an accountancy firm than a woman and ten times more likely in a law firm. McKinsey made several recommendations to address the imbalance, one of which was that women have equal access to the right career development opportunities through a systematic work allocation process based on objective criteria, such as competencies or experience. Work allocation goes to the very heart of the operation of a professional services firm. Changes to work allocation practices are hard to implement, but can have a considerable impact on the progression of female talent. McKinsey conducted follow-up research in 2015 and found that work allocation was an ongoing challenge. 70% of women in both law and accounting firms said that their firm’s work allocation process was unfair, and 86% of law firms had no formal work allocation process in place. In the absence of a systematic process, work allocation is a subtle concept that can be difficult to do in a way that promotes diversity and creates a level playing field for men and women. In deciding to whom work should be allocated, partners can make assumptions about women’s desire or capacity to do certain kinds of work or transactions. The result can be to ‘kill women with kindness’ by allocating the more challenging work to men on the team so as not to put too much pressure on a woman. A woman can ultimately end up with less experience, weaker client relationships, and lower revenue – all of which are career-limiting in a professional services firm. This phenomenon is also referred to as unconscious benevolence. Research conducted by the 30% Club in Ireland across 14 of the top Irish professional services firms in December 2019 contained some fascinating findings. For example, 21% of equity partners in accountancy firms are women, and that figure is 40% at the non-equity partner level. The research found that only four of the 14 firms that participated in the research had a formal work allocation process in place. On foot of that research, the 30% Club recommends that where firms have not adopted work allocation policies, they should pilot the introduction of such policies. They should also review work allocation practices to ensure that equal opportunities to gain expertise and experience are available to all. Finally, it urges firms to ensure that family-related absence does not impact work allocation and recognise leaders who successfully manage work allocation on their teams. Across professional services firms internationally, work allocation processes are becoming more formal and technology-enabled. Many resource management consultancies provide services and systems to firms to assist in this critical aspect of a firm’s work. Formal processes can have a significant impact on the development of female talent in firms and should, therefore, be considered as part of a firm’s diversity strategy.     Rachel Hussey is Chair of 30% Club Ireland and a Partner at Arthur Cox.

A lot of work today simply can’t be done well without high-touch collaboration – a challenge when many people are working from home. New tools are helping, though, write Ryan Kaiser, David Schatsky and Robin Jones. The pandemic, with an impact lasting far longer than initially expected, is forcing organisations to rethink how their teams can collaborate from a distance. Some widely used digital tools make certain forms of collaboration – such as sharing and editing documents – easy. But other, critically important types of collaboration remain challenging when colleagues are not sharing physical space, or even time zones. Organisations can experiment with a newer breed of tools, some still experimental, that aim to support remote, high-touch collaboration. In view but out of sync “Did he hear what I just said?” “Was that a smirk?” “She’s looking down – is she texting?” It’s safe to assume that these questions cross the minds of many workers during days of endless video calls. The concentration required to process these virtual interactions can be taxing, leaving workers exhausted. But with so many professionals working from home due to the pandemic, it’s imperative that organisations find effective ways for remote workers to collaborate. New technologies are answering this call: from immersive environments to virtualised offices that facilitate casual interactions, organisations may soon have many more options for helping their teams collaborate effectively at a distance. Collaboration is key, but challenged by remote work Most organisations accept that effective collaboration is essential for high performance. Apple leaders considered collaboration to be so important that they designed its headquarters building to promote creativity and collaboration. Even workers’ perceptions that they are working collectively, according to a 2014 study, can enhance their performance. Thus, collaboration activities are pervasive in the modern office. Indeed, some researchers believe “collaboration is taking over the workplace”, with time spent by managers and employees in collaborative activities increasing by 50% or more in recent years. It’s no surprise that collaboration is among the soft skills that employers seek most. But with the pandemic forcing millions of people to work from home, collaboration has become more challenging. Remote working obscures body language and distorts verbal cues that can be crucial to understanding intent. Formal, scheduled video calls – or more frequent instant messages or texts – are no substitute for quick, spontaneous exchanges of information. Professionals working in sales, customer service, management, design, and other roles in which impromptu and collaborative interactions are integral to the job may be particularly challenged. Some workers feel isolated. Managers are struggling to onboard, integrate, and teach office norms to new staffers, and building and sustaining an organisation’s culture has rarely been more difficult. Even when the crisis is behind us, the need for better remote collaboration will persist. High-touch collaboration still works best in person Of course, many, even most collaborative activities don’t require face-to-face interaction. A wide range of digital communication and project management tools support sharing files, editing documents, and communicating project status. But other valuable collaborative activities – scrum meetings for coordinating software development, brainstorming sessions to generate product ideas, hallway conversations to quickly exchange useful information – have tended to rely on face-to-face interactions. We call such activities high-touch collaboration. High-touch collaboration activities are typically synchronous, spontaneous, or sensory. Synchronous means two or more people are present in the moment when the activity is conducted, allowing for a free-flowing exchange of information. Spontaneous means unscheduled, low-overhead interactions that may occur outside the confines of a formally scheduled meeting. Some of the best ideas, and even businesses, started as impromptu thoughts or interactions between colleagues. Sensory refers to the non-verbal communication or body language we unconsciously decipher when interacting with others. Arm positions, posture, and tone of voice can influence how or when others choose to engage with or respond to us. Leaders can use this simple three-S model to identify the high-touch collaboration activities in their organisation that remote working arrangements may impair. Below are some common examples. They are important in our work and the work of many of our clients – and they can be difficult to perform when collaborators are just faces on a screen. Structured, interactive sessions. Some types of workshops or labs, employing techniques such as design thinking, aim to solve complex problems or help a group achieve consensus on a designated topic. In addition to typically needing a skilled facilitator, participants often need to read the room to assess group understanding, alignment, and engagement. Example: a lab may be used to forge consensus about the vision of a new firm-wide initiative. Ideation and co-creation. Many workers need to brainstorm and exchange information spontaneously, typically in a shared space with a visual aid such as whiteboards or sticky notes. Example: co-creation may be useful for brainstorming new product features to include in future releases. Spontaneous information exchanges. Employees may need to exchange information directly outside a formally scheduled meeting – perhaps as quickly and casually as poking one’s head in an office to ask a brief question. Example: spontaneously exchanging information with colleagues can be helpful when finalising an important client presentation. Informal connections. Conversations that typically take place in the elevator, office kitchen, or other common areas can foster a sense of connection and community; walking the halls can help cultivate relationships with clients and co-workers. Informal connections tend to rely on interpreting sensory and contextual information. Example: managers may informally check in with teams during a stressful time period to gauge well-being and engagement. To bolster collaboration among remote workers, we need tools that provide better support for these kinds of activities. Collaboration tools are proliferating A new crop of digital collaboration tools has emerged in response to the needs of companies with remote workforces. Vendors launched or enhanced at least 100 digital remote collaboration products in the first eight months of 2020, compared to the 24 product introductions we tallied in the fourth quarter of 2019. Established collaboration vendors are rapidly rolling out new features in response to user requests, and some have released free versions of products in an effort to gain market share. Some of this activity involves familiar categories of collaboration tools such as video-conferencing. Other types of tools – such as digital whiteboards, virtual offices, and immersive environments – may be less familiar, but they can provide crucial support to synchronous, spontaneous, and sensory collaboration activities. We scanned the offerings of hundreds of vendors and spoke with more than a dozen of them to learn more about their capabilities. Video-conferencing. When the COVID-19 pandemic forced millions of workers to work from home, many companies responded by substantially increasing their use of video-conferencing Google, Microsoft, and Zoom have all reported a surge in usage of their platforms. Allowing colleagues, clients, and partners to see each other over video can mitigate the feeling of isolation that some remote workers feel and can build and maintain the rapport crucial for collaborative efforts. Recent innovations in this category include the use of artificial intelligence to frame a caller’s face, background obfuscation to prevent distractions, and the use of avatars. But video-conferencing has its drawbacks. Not all work interactions occur in the confines of a formal meeting. Any given video-conference likely includes at least one participant battling audio and video quality issues, including lags that can jumble non-verbal cues and distracting background noise – especially for people sharing space with partners and children. Workers also report feeling exhausted at the end of a day filled with numerous video calls due to the mental focus required to concentrate on a grid of colleagues. Ideation and whiteboarding. Because it supports problem-solving, design, and strategic planning, ideation can be a critically important collaboration activity. A classic setting features a blank whiteboard, markers, and a team with ideas to share. Vendors such as Microsoft, Miro, and Mural offer digital tools that aim to provide the benefits of in-person ideation in a remote environment. Such tools typically feature an interactive workspace designed for visually oriented ideation and problem-solving. They are best suited for co-creation and ideation activities but can also be used to facilitate labs and similar sessions. A variety of features help spur thinking. For example, users may have access to templates or frameworks tailored to a variety of meeting types such as a scrum call or a design thinking session, time-keeping features to keep a group focused, virtual sticky notes to jot down ideas, and polling to streamline the decision-making process. These tools share little contextual information about users, however, making it hard for facilitators to read a room and determine how to best engage participants. Legibility can sometimes be difficult, and employees may need to consider a touchscreen, stylus, or other peripheral to maximise their capabilities. Virtual offices. Other types of tools attempt to replicate office spaces on your computer screen. Virtual offices are intended to run continuously in the background, showing in real-time what your colleagues are doing through the medium of digital aerial views of office floor plans, avatars, or even 3D worlds. And they aim to emulate the natural, rapid types of interactions that frequently take place in a physical workplace like tapping someone’s shoulder to ask a question. These platforms display context about colleagues – are they meeting with a client right now, or are they listening to music? – and they provide multiple pathways by which co-workers can informally connect. Sample virtual office vendors include Pragli, Sococo, Virbela, and Wurkr. Virtual offices typically allow significant customisation (avatars, floor layout, branding, etc.) and integrate with a growing list of social and collaboration applications one might use throughout the workday, such as Microsoft Teams, Slack, and Spotify. These vendors also enable informal interactions through emotive digital gestures such as high-fives or dance movements, allow users to tap each other to instantly join a virtual meeting room, and offer the ability to lock spaces for more private conversations. Many also allow screen-sharing and the uploading of files. Some virtual offices currently lack the ability to integrate with common office software such as Google or Microsoft and may lack common ideation mediums such as whiteboards. Some tools use much of a laptop’s processing power when rendering a 3D office, potentially affecting other applications. Immersive environments. This is an emerging category of tools that aim to enable workers to connect, share experiences, and participate in simulated real-life scenarios using augmented or virtual reality (AR/VR) technologies. Some studies have shown that VR is a promising medium for remote collaborative work. Users experience a 3D shared environment where they can see representations of themselves and colleagues and conduct meetings. Immersive environments are best suited for interactive sessions and co-creation/ideation. The virtual environments provided by tools such as Arthur, HoloMeeting, and Spatial can range from basic rooms to non-cubical architecturally complex spaces that expand creative possibilities. Some vendors make it possible for users to take a selfie and upload and wrap the image around an avatar for a personalised, life-like presence. Combined with spatial audio and visible mouth or hand movements, these technologies can give one the impression of being in the same space as a colleague. Interacting with the environment and accessing menus using one’s hands or controllers is highly intuitive. Typical features include 2D or 3D whiteboarding options, 3D process flows, and the ability to access content from the web, including images and 3D models. While some platforms are accessible by smartphones and laptops, the full experience is typically only available with the use of an AR/VR headset – a factor that may limit adoption in the near term. Early-stage tools may suffer from distracting latency – or lags in refreshing the display – or lack integration with other applications, which limits the type of work one can do, such as co-edit a PowerPoint slide, and most have smaller capacities (usually under 20 participants) when compared to virtual offices. What to watch The descriptions above are a snapshot of a rapidly moving market. Progress in the underlying technology of AR/VR, and increasingly affordable hardware, will likely boost the appeal of immersive environments over the next couple of years, for instance. Other developments in the domain of remote collaboration are worth watching. New features. With so many workers affected by the pandemic, collaboration vendors are quickly responding to user needs and rolling out new features. For instance, Microsoft recently deployed ‘Together mode’, using AI to place meeting participants side-by-side as if they were sitting in a virtual auditorium. Other advances include attention tracking, which alerts a host if an attendee goes more than a few seconds without having an application open; intelligent capture, which can make a person’s video image transparent so users can see content being written or drawn on a whiteboard as it happens; and real-time translation. Organisations should take note of this rapid pace and consider product road maps when evaluating tools. New mediums and uses. Remote collaboration tools are evolving, and organisations are likely to experiment with them in various ways. Some executives have used popular video games such as Animal Crossing, Grand Theft Auto, and Minecraft to conduct meetings, for instance. While some may not be inclined to use video games for collaboration or are unfamiliar with the format, others feel they help people think differently and bond with colleagues. The education sector may be another testing ground as teachers, students, and parents around the globe are now being forced to learn how to use virtual collaboration tools. Other formats are likely to emerge. New insights. Collaborating via software enables novel analytical applications not possible with conventional in-person conversations. For example, Gong uses speech recognition and natural language understanding technology to transcribe, annotate, and analyse data from sales calls to coach salespeople toward better performance. YVA.ai uses artificial intelligence to predict burnout and enhance employee engagement. Talent leaders may want to consider how data within these tools can help inform their talent strategies or improve employee performance. New shortcomings. Improved tools may eventually solve the video-conference fatigue problem, but it’s possible that emerging remote collaboration technologies may give rise to other unpleasant technology-induced side effects such as the dizziness or nausea that can accompany immersive environments. When choosing a collaboration tool, organisations should take these into account and design mitigation strategies such as time limits where applicable. New risks. As workers migrated to home networks and personal devices after the onset of the pandemic, firms faced an increase in hacking attempts, and many are enhancing their cybersecurity posture accordingly. The amount and type of information generated by remote collaboration tools could be especially sensitive, and companies should strive to ensure that such data is secure while meeting workers’ reasonable expectations of privacy. Preparing for a (somewhat more) remote future Many workers will not return to the office or may work from a company office only part of the time. According to a June 2020 Fortune/Deloitte CEO survey, CEOs expect 36% of their employees on average to still be working remotely by January 2022, three times as many as before the pandemic. One forecast suggests that through 2024, around 30% of all employees currently working remotely will permanently work at home. Many organisations are likely to need effective remote collaboration tools and approaches. Managers, particularly those in industries where remote working is already familiar, such as technology, financial services, and business and professional services, should begin exploring the use of remote high-touch collaboration tools, especially for collaborative activities that are synchronous, spontaneous, or sensory. As workers’ exposure to, and comfort with, these tools varies, organisations should consider implementing effective training and adoption strategies as well as policies guiding effective use. It may be helpful to think of remote collaboration as more than just a way of coping with the pandemic. To be sure, the pandemic triggered a surge of interest in remote collaboration and a burst of activity in the market for remote collaboration tools. But even after the crisis subsides, the need to support high-touch collaboration for remote workers will likely remain. This trend may carry the seeds of new opportunities. It may bring greater flexibility to talent models, offer workers new opportunities to balance professional and personal needs, help reduce the carbon footprint of work, and enable entirely new business models and industries. The development of remote collaboration could eventually change how we work in surprising and beneficial ways. Ryan Kaiser is a senior manager in Deloitte’s US Innovation group, where his efforts focus on digital transformation, strategy, and product/solution incubation. David Schatsky, Managing Director of Deloitte US, analyses emerging technology and business trends for Deloitte’s leaders and clients. Robin Jones is a Principal in Deloitte’s Workforce Transformation division, with 22 years of organisation and workforce transformation consulting experience.

As the global accountancy profession began adapting to the COVID-19 pandemic and its consequences, the International Federation of Accountants convened a series of round-table discussions to understand the implications of the pandemic for professional accountants and leaders. Kevin Dancey and Alta Prinsloo outline the findings. Crises inevitably demand that difficult decisions be made. Yet, the preferred conditions for making such decisions – time to deliberate or a clear sense of focus, for example – are in short supply. Countless small business owners, CEOs, government leaders and more confronted this reality in 2020. For many of them, professional accountants were there as trusted advisors when there was no semblance of certainty. Like every profession, accountancy will emerge from COVID-19 changed. We will be accustomed to digital processes we once thought impossible. Our change management abilities will be sharper than ever. How we anticipate the future will be informed by an experience many of us never imagined would happen. Right now, the profession has the opportunity to transform for the benefit of business, government, and society. It is also a critical moment to nurture existing talent and attract new talent. We must achieve this progress collectively, with clear and measurable goals. Through it all, the pandemic highlighted the importance of future-proofed skills that can anticipate challenges and opportunities, and are agile in a new world where professional accountants are established as strategic leaders. A shock to the system In the Netherlands, virtual work has been commonplace for more than a decade. When COVID-19 forced lockdowns, professional accountants were ready. In other regions, the transformations were not as simple. In South Africa, workers embraced change very quickly, but the more remote areas of the country found it difficult to find immediate solutions. In China, meanwhile, the shift to remote work was rapid. In the US and many other countries, new systems took root overnight, but with them came new-found concerns about security and the availability of technology. 94% of the global workforce live in areas where workplaces closed in 2020 due to lockdowns, according to the International Labour Organisation. These challenges impacted governments, businesses, and employees. In our new hybridised workplaces, preserving the tenets of trust and integrity while also embracing opportunities that virtual environments introduce is key. For example, when firms are not bound to a physical office, hiring more diverse talent from different geographies is possible. Educators and students were also disrupted and had to manage through a wide range of trials. On the one hand, universities and professors moved faster than ever to online instruction and, in some jurisdictions, had to overcome legal limitations in administering examinations online. On the other, students had not only to navigate internet bandwidth challenges, but also the mental health toll, personal economic hardships, and more, which the pandemic inflicted. One silver lining of remote learning is that classes not bound to a physical classroom can capitalise on the connective power of technology. In academia, as in the workforce, it has become clear that much of the accountancy profession’s infrastructure needed to transform – not just for the immediate future, but also the long-term. While the core skills of the professional accountant have not drastically changed due to COVID-19, the profession is changing. This crisis cast a spotlight on anticipation and agility, making it clear that the profession must take the opportunity now to rethink our curricula, our business models, and how professional accountants maintain their competency and relevancy so that they are ready for anything. Evolving technology, regulations and standards In early 2020, digital transformation was either in progress or identified as a strategic growth driver across businesses, accounting firms, governments, and beyond. Through the crisis, however, technology and data have been imperative not only to stay operational, but also to inform new and evolving strategies and ways of working. In a Deloitte survey, more than one-third of financial services industry firms in the US said technology upgrades were the top priority emerging from COVID-19. Meanwhile, more than half cited digitising client interactions as the first imperative. Across all industries, according to PwC, more than 60% of global CEOs acknowledge that they need a more digital business model for the future and that working outside of an office is here to stay. The way businesses everywhere operate is altered forever, and that reality has shifted how professional accountants engage with stakeholders. Professional accountants are the custodians of information that drives long-term strategy and, as businesses transform to stay relevant, professional accountants must be at the centre of that transformation. With change comes uncertainty, both for professional accountants and our stakeholders – especially the public. In this moment, the profession must align around clear goals for our members so we can collectively meet the changing demand around us. This is critical as we aim to leverage technology in new ways, and as we continue to champion trust and transparency in businesses and governments worldwide. As a profession, we cannot passively accept change; we must seize the opportunities change creates while also anticipating and mitigating risks. We have the guiding principles to do this and international standards for financial reporting, audit and assurance, ethics, public sector, and, hopefully soon, sustainability, will continue to help the profession evolve. Even regulators are being challenged to adapt to how accountancy work has changed, especially in light of 2020. In round-table sessions, we discussed how accounting firms should consider advocating for a way forward by partnering with regulators on the latest approach to financial reporting and auditing in a digital-first world. This will also serve us well as we align ourselves with a shared vision of the role sustainability reporting, focused on environmental, social, and governance (ESG)-related matters, will play in the future of the accountancy profession and our stakeholders. Accountancy is directly tied to prosperity, and a more holistic view of how people and planet fit into our profession is imperative. According to many stakeholders, sustainability is now an indisputable necessity. A long-term strategy rooted in sustainability helps guarantee any organisation’s place in the future. Indeed, two-thirds of global respondents in a recent BCG study on how the pandemic heightened awareness of environmental challenges agreed that economic recovery plans should prioritise environmental concerns. To that end, we must evolve our mindsets and reporting, and perhaps most importantly, our curricula for future talent. In particular, the students we spoke with were passionate about a much larger focus on ESG in the accountancy profession. As one student from Hong Kong said, “We are not prepared to handle ESG because there are no strict standards to hold us accountable”. For the future of the profession, transparency and accountability concerning ESG and long-term sustainability must be ingrained in high-quality reporting and assurance practices globally. IFAC is committed to advocating for new sustainability standards that would offer a reliable and assurable framework relevant to enterprise value creation, sustainable development, and evolving expectations. This is an opportunity for accountancy to evolve and to offer the next generation of professional accountants, many of whom identify as global citizens and environmental advocates, a strong foundation to make a difference. The important marriage of technical and professional skills Change management and sharp communications: From every region, discipline, and position, one skill was referred to more often than any other in every round-table we convened in the past three months: change management. We were in a rapid state of evolution before COVID-19. At the start of 2020, McKinsey & Co. noted that nine in ten business managers said skills gaps existed in their organisations or soon would. That reality has only become more evident. Accountancy is not a profession operating in a static world, and the skills learned have to reflect an equal measure of agility. There is a clear need for well-rounded skillsets that combine technical skills and professional skills that are rooted in relationship-building and communication. Doing so means placing more emphasis on stronger, trust-based relationships with key partners. This requires a focus on interdisciplinary skills when engaging with colleagues and in our strategic discussions with clients. Stronger communication skills will help professional accountants manage risks and garner buy-in for solutions. Scenario planning and storytelling: Professional accountants are dynamic thinkers with an aptitude for proactive planning. We are trusted partners in times of change and uncertainty, and we must be prepared for that demand to continue. We have to maintain the momentum 2020 created and the renewed trust imparted on our profession. Many round-table discussions spent significant time on the importance of accountants continuing to build in the areas of professional skills and focusing on new techniques for analysing and interpreting data in differing circumstances, and aptitudes for strategising on increasing priorities such as ESG. Our stakeholders agreed that the profession must become better storytellers, able to effectively show how all the pieces fit together and how the finance function bolsters resiliency and growth. The basics of this can be taught in classrooms, but this skill will largely be shaped on the job. Upskilling: How we compete in the learning and development space – with dynamic curricula, more agile credentialing and continuous learning models that are suited to a hybrid world – will be a differentiator moving forward. “Professions that invest [in education] now are going to come out of this with a competitive advantage,” said one academic leader. We have to show aspiring accountants and those who might be upskilling during their career that the profession is anticipating, adapting with agility, and remaining a step ahead. Affirming the need for agile, future-proofed skills, one professional accountancy organisation CEO said, “I’ve worked through three pretty major crises in my career, and the common theme through all of them is that you must use it as an opportunity for change. A crisis gives you license to adapt”. Defining the accountant of the future Professional accountants are, and will continue to be, strategic partners in any setting, be it in the private or public sector. The pandemic tested our capacity as business drivers, and we rose to the occasion. This is a pivotal moment for the accountancy profession, one where we will change old paradigms and embrace new skills for the digital and rapidly evolving world in which we live. How we act in this moment will define the future of the profession, and the opportunity for positive change is immense. Right now, societies and economies around the world are trying to find a way to move forward from a crisis-laden year. Professional accountants are the highly strategic and collaborative problem solvers who will help businesses and governments, large and small, move forward. In the round-tables IFAC conducted in recent months, CEOs, auditors, academics, students and more from around the world shared a clear vision: we, as a profession, must accelerate new ways of working, embrace technology, align our work to new and evolving societal demands and, above all, ensure we are investing in the right balance of skills that will fortify the profession for whatever the future holds.   Kevin Dancey is Chief Executive at IFAC, and Alta Prinsloo is Chief Executive at the  Pan African Federation of Accountants and former Executive Director at IFAC. The research process The International Federation of Accountants (IFAC) spent the past three months engaging with dozens of people associated with the accountancy profession across more than 20 countries with a range of perspectives. They included chief executives of professional accountancy organisations, chief executives in business, chief financial officers, audit committee members, auditors general, accounting firm leaders, academics and students.  By convening these various stakeholders, IFAC set out to understand the implications of the pandemic for professional accountants and leaders, and how their experiences will affect the future of accountancy and, more specifically, accountancy skills. The global COVID-19 pandemic has accelerated change and forced us to reconsider the role of professional accountants. We heard from our stakeholders about the transformation of organisations, the agility of business, and the resilience of professional accountants managing through unanticipated change.

Cormac Lucey explains why, as societal fissures and inequality grow, we must no longer be satisfied with unduly simple answers to complex questions. The biblical story of the Tower of Babel explains how humans across the world speak different languages. In the generations following the Great Flood, humans spoke a single language and migrated to the land of Shinar, where they decided to build a tower tall enough to reach heaven. Unhappy at this impudence, God intervened so that humans spoke several different languages, were unable to understand each other and were thus unable to build their idolatrous tower. Today, it is not different languages, but several other aspects of life, that risk pulling us apart. Specialisation has been one of the key ingredients of dramatic economic growth in recent centuries. But growing vocational differences and technical specialisation make it more and more difficult for national leaderships comprised of generalists to manage and control a society increasingly comprised of technical specialists. Consider the economic disaster of the financial crash just over a decade ago, and the failure of the Central Bank of Ireland and the Financial Regulator to take corrective action. Consider the current lockdown and reflect on the fact that, if everyone in the Republic contracted COVID-19 and we suffered the median fatality rate estimated by the World Health Organisation (0.23%), the resulting fatalities would equal around one-third of total fatalities that we suffered from all causes in 2019. Another serious societal fissure is growing economic inequality and the increasing role of education in determining an individual’s earning capacity. Here in Ireland, we are lucky that income inequality has not grown over recent decades. But it has grown substantially in the US. We can see the political polarisation that has followed and, increasingly, political affiliation in the US follows education. This pattern was very evident when the UK voted for Brexit. The political and media establishments may dismiss those who dared to vote for Brexit or Trump. But if the pandemic has taught us one thing, it is that in an ever more complex world, our fates are increasingly interdependent. In such a world, it makes little sense to dismiss large blocs of fellow citizens as if they are fools. Yet that is what has happened. This sneering reaction feeds another fissure, that which separates insiders from outsiders. We can see this in the rise and rise of monopolies and quasi-monopolies in the US. A paper published recently by two Federal Reserve economists found that the concentration of market power in a handful of companies lies behind several disturbing trends in the US economy such as a falling share of national GDP going to labour, a rising share going to capital, increasing inequality, rising financial leverage, and an increase in financial instability. Here in Ireland, we are confronted by a different monopolistic power, that of the State. At the end of Q2 this year, average weekly earnings in the Irish public sector exceeded those in the private sector by 32.6%. In the UK in 2019, (pre-pension) public and private sector earnings were approximately equal with public sector earnings 3% ahead before consideration of bonuses and 3% behind after their consideration. The stark public/private gap in Ireland arouses little public commentary, but feeds the fissures in our society. What can we do as we face this increasingly divided world? We should be careful of those who suggest simple answers to complex questions that generally don’t have yes/no answers but, rather, difficult trade-offs. Independence of judgement matters just as much for our public life as it does for our auditors. Cormac Lucey is an economic commentator and lecturer at Chartered Accountants Ireland.

2020 was nothing short of a disaster for many people, but a constellation of emerging factors can give us hope for 2021 – from an economic standpoint at least, writes Annette Hughes. For the Irish population, COVID-19 has in many ways been a double-edged sword over the past nine months. The recent transition from levels two and three to a nationwide level five lockdown caused a significant number of businesses to close once more and pushed the number of those in receipt of government wage support through the Pandemic Unemployment Payment (PUP) up by 50% month-on-month from 228,858 on 11 October to 342,505 on 9 November. However, this is still well below the 5 May peak of 598,000. EY’s labour market forecasts suggest that, for November, this represents approximately 14% of those in employment. Kerry and Donegal suffer most, with about one in five workers in receipt of PUP at present, possibly due to their dependence on tourism. The reality for the fortunate segment of the population that managed to hold on to employment is quite different. The Central Bank of Ireland has reported that household deposits increased by 10.9% year-on-year in September 2020. This is indicative of a general trend of reduced consumption and increased savings since the beginning of the pandemic, as the measured savings ratio reached an unprecedented 35.4% in Q2 2020 with a quarterly increase in savings of €10 billion for Q2 2020. This suggests that there is a section of Irish society that is broadly unaffected, has money, and is merely waiting to spend. Results from a recent survey conducted by EY indicate that the world mood is anything but black and white. The impact of COVID-19 on consumer behaviour has led to diverse spending patterns globally. In the October release of our Future Consumer Index, 26% of consumers noted that they were unaffected and unconcerned for the future, while 31% stated the antithesis, commenting that they were struggling and worried about what is yet to come. A lack of job security, family health, and discomfort around a premature return to societal norms are foremost in the minds of those who believe the COVID-19 impacts will remain in the medium- to long-term. The remaining consumers surveyed classed themselves as either okay but adapting (30%) or hard-hit but optimistic (13%). Retail in Ireland is a mixed bag of late. The CSO release for September proves the lockdown ‘banana bread, work-from-home, DIY’ hypothesis with sales of hardware, paint and glass up 31.3% year-on-year while food, beverages and tobacco also increased by 12.4%. Meanwhile, sales for fuel have reduced by 10.2%, with stationery, books and newspapers also down by 11.6% as large swathes of workers, particularly those working in multinational companies, no longer commute to Ireland’s urban centres. EY expects that economic recovery will resume in 2021, with GDP forecast to rise by 3.5% after a 3.9% contraction in 2020. The current accumulation of deposits, which are earning meagre interest in the banks, combined with reduced reliance on PUP and projected employment growth of 6.5% should significantly support consumer spending next year and act as a catalyst for increased economic activity. Annette Hughes is a Director at EY-DKM Economic Advisory.

Leigh Harrison outlines the practical issues, for both the auditor and management, that may arise when applying the revised going concern standard. As auditors rapidly approach the start of ‘busy season’ and management near the end of the financial year, one of the biggest challenges that will impact on both the auditor and management are the changes to the going concern auditing standard. The revised standard, applicable for periods beginning on or after 15 December 2019, increases the auditor’s work effort, which includes expanded risk assessment procedures over going concern, increased scrutiny over management’s going concern assessment and enhanced reporting requirements in the auditor’s report. The directors’ responsibility for going concern is seated in company law, with the duty to prepare financial statements that give a true and fair view, in accordance with the applicable financial reporting framework. The accounting standards require the preparation of a going concern assessment, taking into account all available information about the future, for a period of at least 12 months. The financial statements are prepared on a going concern basis unless management determines that they intend to liquidate the entity, cease trading, or have no realistic alternative but to do so. Complexities in the current year The world is now a very different place than it was at the start of 2020. In a matter of months, COVID-19 swept across the globe. The pandemic subsequently led to travel restrictions, business closures, cancelled events, and lockdowns. Governments responded with a range of financial supports in an attempt to support jobs and businesses. During this time, management will have had to revisit their business plans, forecasts and cash flows in response to the ever-changing economic environment. Meanwhile, calls for better climate change reporting and the end to the Brexit transition period compound the complexity. Practical issues for management Although the directors are ultimately responsible for the assessment of going concern, in many cases, they may delegate the preparation of the assessment to management. The directors will need to possess the skills and knowledge to understand and challenge the assessment prepared by management and have a robust governance, oversight and approval process to challenge and validate management’s assessment. For management in smaller businesses, where an assessment of going concern may not have been formally prepared and documented in previous years, the requirement in the current year is likely to be a step-change. In some ways, the continually changing economic environment in which businesses currently operate will have prepared management for the preparation of their going concern assessment as they continuously re-assess the impact of change on their business. Ahead of year-end, management should engage with their auditor to agree on the expected audit deliverables and ensure that they have the processes in place and resources required to perform the assessment. Remote working may add further complications as inputs required for the assessment are likely to be prepared across the finance function, and team members may be on furlough. Management will need to factor in additional time for scenarios where, for example, additional funding is required or waivers of covenants must be negotiated and agreed, as credit approval may be delayed due to the impact of bank staff working remotely. Management will need to have specific processes in place, including a risk assessment process to identify, assess and address risks facing the business relating to going concern. Management will also need to explain to the auditor how they measure and review financial performance, use their information systems to identify and capture events or conditions that may impact the going concern assessment, and how management identified the relevant method, data and assumptions used within their going concern assessment. The assessment must be prepared and documented by management in all cases and should be tailored and right-sized for the business. For some non-complex businesses with high levels of cash reserves, management’s assessment may not require detailed cash flow forecasts. A memorandum detailing management’s analysis and considerations may suffice. In contrast, more complex entities will require a thorough assessment of current and future risks, forecasted cash flows, consideration of current funding available, and the identification and assessment of plans to address identified risks. The area management must consider when preparing their assessment is wide-ranging and includes risks facing the business (both internal and external, current and future), the business environment, developments in the industry, and future prospective plans. The purpose of the assessment is to determine whether certain events or conditions may cast significant doubt on going concern and whether those events result in a material uncertainty to exist. In preparing and documenting their assessment of going concern, the auditor might expect to see the following: Analysis of the core operations of the business as they relate to going concern, including the business model, types of investments or disposals planned, how the business is financed and so on. Analysis of the current financial position compared to the prior year, considering key metrics such as net current assets/liabilities, operating cash inflow/outflow for the year-to-date, funding arrangements in place and related covenants, and so on. Analysis of the results post-year-end compared to the prior year, including revenue, profits, and status of funding. Details of events or conditions identified by management that may cast significant doubt on going concern and may affect the future performance of the business. For example, changes in demand for products or liquidity challenges. Where events or conditions are identified by management, management should document their plans to address those events. When management consider that a detailed assessment is required, they should document the model, assumptions and source of data used in their assessment. Management may find it useful to prepare a sensitivity analysis, where there are several potential assumptions or actions. The assumptions and data used in the assessment of going concern must be consistent with those used elsewhere in the business – when considering the valuation of goodwill, for example. Practical issues for the auditor In the planning phase, the auditor will need to ensure that the team has the resources and experience necessary to perform the required procedures. Where the new requirements present a step-change for clients, it will be particularly important for the auditor to engage early. Doing so will help clients better understand the extent of audit evidence expected, and the level of input that will be required from management throughout the audit process to assist the auditor in their enquiries and procedures. There is no prescribed methodology for management to use when preparing their assessment of going concern. In scenarios where management has determined that detailed forecasts and cash flows are not required, the auditor will need to use their professional judgement to determine whether they consider the assessment to be appropriately detailed. This may lead to difficult conversations. At the other end of the scale, management’s assessment may include, for example, detailed forecasted cash flows that are built on complex models with multiple assumptions and sources of data. In these situations, the auditor will need to obtain a detailed understanding of the model, and careful consideration will be required to determine which assumptions and sources of data are critical to the assessment. Professional judgement will be needed when designing the required audit procedures, which may include evaluating the design, implementation, and testing management’s controls over the process for preparing the assessment. For 2020 year-ends, more entities will likely face liquidity issues given the continuing impact of COVID-19 on business. As such, management’s plans may include seeking reliance on group support. Auditors of components within groups will need to get a ‘big picture’ view of the group’s ability to provide the support required. More than ever, there is a greater need for the auditor to maintain their professional scepticism, challenge management throughout the audit process, and evidence that on the audit file. Conclusion For some businesses, the implementation of the revised going concern standard will be a step-change that will result in changes to processes, controls, oversight arrangements and increased management input to prepare management’s assessment of going concern. For the auditor, greater audit effort will be required, resulting in additional time input throughout the audit process. The auditor will need to exercise their professional judgement when evaluating management’s assessment, identifying the critical assumptions and data, considering whether sufficient appropriate audit evidence has been obtained, and concluding on going concern in the audit report.  Leigh Harrison is Director at KPMG’s Department of Professional Practice.

When it comes to sustainability, the problem is not that there are no standards. Rather, there are too many of them, writes Dr Brian Keegan. In the current abnormal news cycle, something has to be really strange to stand out. One such item in October was a report that UK authorities were to permit the opening of a coal mine in the north-east of England. This runs counter to most of the prevailing trends. True, the rehabilitation of coal was an element of Donald Trump’s first presidential campaign, but that has not prevented its decline in the US in favour of cleaner natural gas and more sustainable sources like wind and solar. Coal from this new British mine is not for energy production. It is apparently to be used in the manufacture of steel. It is also being used in the manufacture of jobs for the impoverished north-east. Job creation tends to rattle sustainability priorities and seems to have been the consideration that swayed the local council into granting permission. The incident does highlight, however, the elusiveness of sustainability because “Decent Work and Economic Growth” is Goal 8 of the 17 sustainability goals promoted by the United Nations. While these goals have garnered considerable traction in the sustainability debate, having 17 goals impedes progress because, in practice, the goals can be contradictory. Goal 13, for example, is “Climate Action”, which is at right angles to opening coal mines in some quarters. This vagueness has conflated the sustainability debate with the already nebulous concept of corporate social responsibility. Corporate social responsibility should be looked upon with suspicion. All too often, HR initiatives to boost staff morale, marketing initiatives claiming green credentials for a particular product or service, or even support for the pet charity of the chief executive are folded in under an ersatz comfort blanket of social responsibility. Claiming sustainable practices or having corporate social responsibility champions won’t cut it. There has to be a concerted drive to come up with broadly acceptable standards to measure genuine corporate progress on sustainability issues. The current problem is not that there are no standards, but rather, that there are too many of them. The current custodians of standards- and ethics-setting, the International Federation of Accountants (IFAC), recently proposed that a new sustainability standards board be established, which would exist alongside the IASB under the IFRS Foundation. This new sustainability standards board should pull together existing expertise and the work of some existing sustainability reporting initiatives. The resulting framework could then be passed to the International Audit and Accounting Standards Board to develop the best assurance processes. This IFAC initiative differs from many other governance initiatives. Too often in the past, ‘solutions’ were provided, for which there was no demand. One of the legacies of this pandemic will be a greater awareness of sustainable practices.  There is demand from investors for comparable and dependable data on environmental, social and governance factors and this form of reporting offers a value-added opportunity for accountants. On the other hand, the initiative carries the risk of becoming hijacked by environmental activism, leading to reporting requirements that would fail a cost/benefit analysis within the SME sector. Earlier this year, Harvard Business Review suggested that the chief financial officer should become the most prominent climate activist in their organisation. There is still some distance to go before this becomes a reality, but in an era when western governments are contemplating opening coal mines, nothing can be ruled out. Dr Brian Keegan is Director of Advocacy & Voice at Chartered Accountants Ireland.

Welcome to a new edition of Accountancy Ireland, the last in what has been an extraordinarily difficult year for most. The best-laid plans made last December are by now  unrecognisable after months spent adapting to shifting realities. Chartered Accountants Ireland started the year with the presumption that Brexit would be the main issue for members in their external environment. Although a global pandemic overshadowed it, the Institute has worked throughout the year to support members on Brexit-related matters and to advocate on their behalf. As we approach the end of the Brexit transition period, our events and updates have continued. We recently opened registration for the third intake of students for our Certificate in Customs and Trade and, in the final quarter of the year, launched a new Brexit Digest e-newsletter full of practical guidance for businesses in Ireland and Northern Ireland. In recognition of Chartered Accountants’ critical role in driving the sustainability agenda, the Institute also recently published the Sustainability for Accountants guide, along with a Sustainability Hub on our website. The fight against climate change is now a corporate imperative. Moving our gaze west, Americans have gone to the polls and the New Year will bring a new administration. In this edition, we look ahead to what the next four years might bring. Change is also afoot in global tax, and Accountancy Ireland looks at the OECD’s proposed reform of the global digital and corporation tax system. Closer to home again, the Institute has endeavoured to respond quickly and effectively to meet the needs of members during the COVID-19 pandemic. Our primary focus has been on providing timely, helpful and practical support to members as they serve their clients and steer their organisations. As an educator, we are acutely aware of the challenges facing students during these months. Our education provision has evolved dramatically over the last year and our CAP1, CAP2 and FAE programmes successfully launched on our new online education platform. Producing the highest-calibre finance professionals is more important than ever for our economy. This festive season will be very different, but I’d like to wish members and students a peaceful, safe and enjoyable Christmas. For those who find themselves in particular difficulty, remember that assistance is available from CA Support. You can find details on our website. Thank you to the committees, volunteers, management and staff of the Institute for their efforts during 2020. I hope that we can make a return to a more normal way of life in the New Year. Paul Henry President

Suzie Arbuthnot ACA, the winner of BBC’s Best Home Cook, discusses life as a parent, entrepreneur, and TV presenter.Earlier this year, you were crowned BBC’s Best Home Cook, how did that come about?Back in 2017, I entered the Great British Bake Off. I was first reserve and was devastated when I didn’t get called up. One of my friends told me to enter this other food programme, and so I did. A few days later, I had a phone interview and then a face-to-face meeting in Northern Ireland, where I had to make a savoury and a sweet dish. I was then flown to London to replicate the three stages you see on the show and, as they say, the rest is history!You recorded the show while setting up your own business. What was that experience like?I became self-employed on 1 February 2019 and I flew to London at the very beginning of March to start filming Best Home Cook. I was completely stressed because I wasn’t bringing in an income, but my husband said: “You have worked so hard for this opportunity, you can’t give up now!” So, having won the title and trophy plate, I had to return to normal life and not tell a soul. It was an agonising nine months. I set up my own practice by following the straightforward steps set by Chartered Accountants Ireland. I was extremely fortunate that my old firm (PGR Accountants, Belfast) referred a piece of work to me, and that got me started.What would you describe as your greatest challenge or achievement to date?I used to say: “finally qualifying as Chartered Accountant”, as it took me eight years. I never gave up, and I knew I could do it. I was able to have my family, have my children, and just enjoy life. I don’t regret a moment of it at all. However, I think winning a UK-wide cooking competition and now presenting my own food-focused TV show, Suzie Lee’s Home Cook Heroes, is pretty amazing!What’s the most valuable lesson you’ve learned?Have faith in yourself in whatever you do, as others are quick to knock you down. This has been true in all areas of my life, so be kind to everyone you meet, treat them the way you would like to be treated, and have no regrets.What do we most need in this world?We need to learn how to switch off. I am a huge culprit, but we are too connected these days – attached to our phones, tablets and laptops. The art of social interaction is starting to wane right in front of our eyes, and it’s all down to our devices.How do you recharge?I love keeping busy, but I get my energy from spending time with family, cooking, going to the gym, playing hockey for Lisnagarvey Hockey Club, and singing with Lisburn Harmony Ladies Choir.

While it might be difficult to find a new job in the current market, it's not impossible. Niamh Collins outlines five key considerations that will put you in the best position to move on in your career. The disruption to employment caused by the COVID-19 pandemic has been severe. From hiring freezes to the Employment Wage Subsidy Scheme to remote working and the tough decision of making redundancies, 2020 has been a year like no other for almost every industry. At the end of July, CSO data showed the COVID-19 adjusted unemployment rate as 16.7% across Ireland – the effects disproportionately spread across younger generations with 41% of 16-25-year-olds out of work compared to 14% for those aged 25-74 years. The employment market is not universally challenged. Despite the economic pressure and instability, there are organisations that need your knowledge, skills and experience. Whatever your reasons for looking for a new role, there are five key considerations which will put you in a better position to get a great job in a challenged market. 1. Be bold with your networking Contacts are invaluable. It’s important to stay in touch with as many people as possible – suppliers, customers, old colleagues and clients. Maintaining these relationships will stand you in good stead because the individuals could provide precious information when it comes to job opportunities, offer useful advice or guidance and even act as a reference when necessary.  Beyond your existing contacts, you can also actively seek out new networking opportunities in your field. Be bold on LinkedIn and connect with plenty of relevant professionals. 2. Be thorough in your research If you have identified a vacancy or a company that you would like to work for, always be thorough in your research. Read up about the business; the values, what they do, who their clients are, and also find out the names of the managers and as much about their careers as you can. Not only will this allow you to address any communications to a specific individual within a department, but it will help you create a better picture of the organisation as a whole.  3. Be flexible about your requirements While you may want the security and stability offered by a permanent job, have you considered pursuing a contract role? The flexibility of hiring a contractor is an attractive prospect for organisations at present. Also, it could be beneficial to weigh-up your salary expectations, especially if (as with many industries) you are able to work remotely. Regularly working from home will save monthly commuting costs and, therefore, lowering your pay demands accordingly (while being sure not to undersell yourself) could increase your attractiveness to employers and might be the difference between being hired or not.  4. Be open to partnering with a recruitment agency Eliciting the assistance of a specialist recruitment agency is a straightforward way to give your job-hunting efforts a boost. It will save you time, give you access to their extensive network of industry contacts, offer a wide range of opportunities that are often not advertised on job search sites and they have the inside line on knowing exactly what hiring organisations are looking for. 5. Be ready to clear your diary and move fast If you are serious about moving jobs, arguably the most important thing to remember is to be ready to act fast as things can change rapidly. Be prepared to clear gaps in your diary so that you can take calls or attend meetings, virtual or otherwise, at short notice.  Clearly explain what your requirements are from the outset and have references ready to go. When markets are difficult and hiring organisations may be looking for its new employee to start at a short turnaround, they will want a quick response if you do get offered a job.  Despite these unusual times, careers are being progressed. Your next role could be a couple of meetings away, but it will require focus, determination and input from you to make it happen. Niamh Collins is Associate Director of Finance & Accounting at Morgan McKinley.

David Duffy discusses recent Irish and EU VAT developments.Irish VAT updatesVAT rate decreaseAs most readers already know, the standard rate of Irish VAT has been reduced from 23% to 21% for the period from 1 September 2020 to 28 February 2021. We expect that most businesses will already have made the necessary changes to their systems and processes to apply the new rate to affected transactions from 1 September 2020 onwards. However, when preparing your September/October VAT return in November, it may be helpful to check that the new rate has been correctly applied. Some of the points to check may include:Has the new VAT rate been correctly applied to your sales? The tax point and corresponding VAT rate for your sales may differ depending on whether the sale was to another business or consumer, whether you operate the invoice or cash-receipts basis of accounting for VAT, and whether a payment was received in advance of the supply. The Revenue Tax and Duty Manual on changes in rates of VAT, available on the Revenue website, provides further guidance on how to apply these rules.Has the appropriate VAT rate been applied to purchase invoices received in the period?Has the appropriate VAT rate been applied to credit notes issued or received during the period? In general, the VAT rate applied to the credit note should match the VAT rate applied to the invoice to which the credit note relates.Does VAT charged at the new rate correctly map to the appropriate general ledger accounts and is it correctly captured in your VAT reports for the period?Extension of COVID-19 reliefsRevenue has confirmed an extension of a number of temporary, indirect tax reliefs introduced earlier this year to help combat COVID-19. These reliefs were originally due to expire on 31 July 2020, but have now been extended until 31 October 2020, subject to further review. The temporary reliefs include:The zero-rate of VAT applies to personal protective equipment (PPE), thermometers, medical ventilators, hand sanitiser, and oxygen when supplied to the HSE, hospitals, nursing homes, care homes and GP practices for use in providing COVID-19-related healthcare services. Relief from import VAT and customs duties applies to the import of medical goods to combat COVID-19 by or on behalf of State organisations, disaster relief agencies and other organisations approved by Revenue, and which are provided free of charge for these purposes. No VAT clawback will arise for the owner of a property used to provide emergency accommodation to the State, HSE or other State agencies in order to combat COVID-19. EU VAT updatesDeferral of VAT e-commerce rulesThe EU has recently agreed to defer the introduction of significant changes to the EU VAT rules for e-commerce transactions from 1 January 2021 to 1 July 2021. The deferral was in response to potential challenges of meeting the 1 January 2021 deadline for tax authorities and businesses as a result of COVID-19. While this deferral gives businesses more time to prepare, it is important for businesses that will be impacted by the changes to begin their preparations. Businesses which will be most affected include retailers with online stores, online platforms and marketplaces which facilitate sales of goods to consumers, and postal and logistics operators which handle imports of goods on behalf of retailers or consumers. A brief summary of the changes coming into effect on 1 July 2021 is set out below. The current domestic VAT registration thresholds for cross-border business to consumer (B2C) sales of goods in each EU member state will be abolished. As a result, a retailer selling goods to consumers in other EU member states will be obliged to charge VAT at the appropriate rate in the member state to which the goods are shipped regardless of their value, subject to a very limited exception where the value of sales to consumers across all EU member states is less than €10,000 per year. The VAT payable to tax authorities in other member states on these sales can be remitted through a quarterly One Stop Shop (OSS) registration rather than requiring an overseas VAT registration. VAT will apply to all goods imported into the EU, at the appropriate rate in the EU country of import, regardless of their value. This is as a result of the abolition of the import VAT relief for low-value consignments with a value of up to €22. This is likely to significantly increase the volume of packages imported on which VAT must be paid. To help facilitate the payment of VAT, the retailer or, in certain cases, the online marketplace facilitating the sale can charge the VAT at the time of sale and pay this VAT to the tax authority in the country of import through a new Import One Stop Shop (IOSS). This return would be filed, and related VAT paid, on a monthly basis. However, this will only apply to imported consignments with a value of up to €150. Packages above that value will be subject to import VAT and customs duty in the normal way at the time of import. An online marketplace that facilitates sales of goods to consumers will be deemed to have purchased and resold those goods in two scenarios: first, the goods are imported from outside of the EU in a consignment of up to €150; or second, the goods are sold within the EU by a retailer established outside of the EU. This will bring additional VAT collection and reporting obligations for these platforms.Additional VAT record-keeping requirements will apply to platforms and marketplaces which facilitate other supplies of goods and services to consumers within the EU.VAT on property adjustmentIn the HF case (C-374/19) the Court of Justice of the European Union (CJEU) ruled that a VAT clawback was payable by a German retirement home operator where it ceased to carry out taxable supplies in a cafeteria attaching to the main retirement home building. The operator constructed the cafeteria and fully recovered VAT on the construction costs as its intention was to sell food and beverages to visitors. This activity would be subject to VAT. It was subsequently determined that there had been approximately 10% use of the café for VAT exempt supplies to residents of the retirement home, which resulted in a partial adjustment of the VAT reclaimed. This was not in dispute.However, subsequent to that initial adjustment, the taxable activity of sales of food and drinks to visitors ceased entirely. The only remaining use was in respect of the VAT exempt supplies to the residents, albeit there was no absolute increase in their use of the building. The question was, therefore, whether this triggered a further adjustment of VAT.The taxpayer had sought to rely on earlier court judgments which support the position that where VAT is reclaimed based on an intended taxable activity but that activity does not subsequently take place, the taxpayer’s right to VAT recovery is retained. However, the CJEU distinguished this case from the others because the intended taxable activity had commenced but ceased and the property was now only being used for VAT exempt activities. Ireland has adopted similar rules (referred to as the capital goods scheme) which can result in a clawback or uplift in VAT recovery where the proportion of taxable/exempt activity in building changes. This typically needs to be monitored over a period of up to 20 years. It is, therefore, important to carefully consider any changes in use of a building as this could have significant VAT consequences.David Duffy FCA, AITI Chartered Tax Advisor, is an Indirect Tax Partner at KPMG.

The pandemic has broken several business taboos and accelerated the role of digitisation in all walks of life. The UK tax system is no different. HMRC’s role in developing the job retention and self-employed schemes’ online portals at speed to deliver support to employers and businesses at a time of crisis has shown that digitisation can be done quickly. It might not have been perfect, but it was very good. On the back of these lessons, the UK Government published its vision for tax administration in the UK in July: building a trusted, modern tax administration system. The strategic importance of this goal has clearly been brought into sharper focus by the pandemic.An important part of the July publication was the announcement of further steppingstones in the roadmap of the Making Tax Digital (MTD) project, starting with extending MTD for VAT to VAT-registered businesses with turnover below the current £85,000 VAT registration threshold from April 2022. MTD for income tax will commence for self-employed businesses and landlords with income over £10,000 from April 2023.But there’s one glaring issue missing from the picture: UK tax legislation is extremely complex. Unless this is seriously addressed, efficient, problem-free, further digitisation of the UK tax system cannot be effectively achieved. For that reason, the Government should also develop a roadmap for simplification of the UK tax system which should work as a precursor to any new digital services developed. This should begin with income tax complexity. If this doesn’t happen, having to navigate legislation that continually increases in complexity coupled with a requirement to make multiple filings to HMRC has the capacity to be extremely challenging for both HMRC, the taxpayer and their agent. The UK Government must simplify to digitise.Leontia Doran FCA is a UK Taxation Specialist with Chartered Accountants Ireland.

Budget 2021 is the next instrument in the government's response to the impacts of COVID-19 on the Irish economy. Between the pandemic and a possible disorderly Brexit, Budget 2021 will not be a normal budget, says Kim Doyle.COVID-19 has presented unprecedented challenges for the global economy. Governments, along with their tax authorities worldwide, have adopted and administered emergency measures to preserve the health of their people and defend against collapse of their economies. In Ireland, we had a mini-Budget in the form of the July Jobs Stimulus, a €7.4 billion package of measures aimed at supporting the Irish economy in response to the impact of COVID-19. We also have a number of administrative measures in operation by Revenue to ease taxpayers’ compliance burden. Brexit also brings challenges. At this stage, we do need to respond to the immediate impacts of Brexit, and a possible disorderly Brexit, and plan for the long-term stability and robustness of the Irish economy. Climate change is, too, the ‘defining challenge of our generation’, according to the Minister for Finance. And, indeed, a raft of measures were introduced last year to tackle this challenge, while others were promised in the future. EU and OECD tax reform proposals continue to pose challenges and bring additional uncertainties into play. The impact of these on the Irish economy could extend well beyond corporation tax receipts and may influence unwanted changes in investment decisions by MNC groups going forward.Framing Budget 2021Budget 2021 may target revenue raising measures to cover the expenditure introduced to deal with the recent challenges brought about by COVID-19 and a possible disorderly Brexit, but any budgetary measures must avoid undoing the impact of the July Jobs Stimulus Package. Health and housing priorities will also have to be addressed in the budget. The government has said the measures will focus on the short-term and not beyond 2021.The government has pledged no increases to income tax credits or bands. (This is also promised in the Programme for Government.) The level of government expenditure over the coming months is unlikely to fall substantially, if at all. Despite the backdrop, tax receipts for the first eight months of 2020 are only 2.3% behind the same period in 2019. Given that some of this deficit is a timing issue and will be recovered in 2021, this is a remarkable outturn. September tax returns will be the final “piece in the jigsaw” before the final Budget 2021 is decided, according to the government. ExpectationsPre-COVID-19, Budget 2021 was expected to be framed around Brexit and climate change. Now, amid a pandemic, what are we more likely to see in the Budget from a tax perspective? Income taxConsidering the government has stated there will be no broad based increases in income taxation, we don't expect to see much by way of income tax measures. We may see some modest tax cuts in the form of increased tax credits for stay-at-home parents and other credits and reliefs targeting lower and middle income earners. We would like to see a long-term commitment to a reduction in our high marginal tax rates of 52% and 55% for employees and self-employed respectively; however, there is no fiscal space to make any pledge to reduce these rates in the short-term.The concept of broadening the tax base, so more people pay a little, has long been debated with very little reaction by government. The main reason may be it is likely to be unpopular with constituents. However, considering the challenges for the Irish economy, the government may need to embrace this concept but balance it with the pledge for no broad income tax increases. A new form of tax relief for individuals working remotely is a possible outcome of the Department of Business, Enterprise and Innovation public consultation on Guidance for Remote Working. Some responses to this summer consultation called for changes to the tax rules for reimbursement of employee expenses and changes to the tax treatment of expenses incurred by employees. We may see some tweaks to the Irish Tax Code in response. Corporation taxThe government reaffirmed its commitment to the 12.5% corporation tax rate in the Programme for Government. The importance of this commitment is evident in the remarkable tax receipts for the eight months to end of August 2020, which are largely driven by large corporation tax increases along with a strong start to the year pre-COVID-19 and more resilient income tax receipts. Ireland is obliged under EU law to implement changes to our tax code to restrict the interest tax deduction taken by companies. At the time of writing, these changes are more likely to take effect in 2022. The EU agreed last year to park its digital tax proposals in order to allow global consensus be reached through the OECD digital tax discussions. Changes to accommodate any digital tax proposals will be premature in 2020 and, therefore, unlikely to be a feature of Budget 2021. Capital taxes In order to further stimulate the economy, lowering both the CGT and CAT rates will likely promote activity in the market and should ultimately see assets put to a more productive use. This rate reduction has been called for and debated in recent years. Perhaps Budget 2021 will deliver. Considering residential property prices have fallen in recent months, there may be scope to increase the related Stamp Duty rate. However, such a rate increase will likely be unpopular among constituents and not helpful considering the struggles reported by many in getting a foot on the property ladder. VATThe extension of the 9% VAT rate to construction services would help encourage the scale of property development needed to absorb the current demand and address the housing shortage. The re-introduction of the 9% VAT rate to stimulate the hospitality sector would complement the other measures, such as the Stay and Spend Tax Scheme. An extension of the new temporary 21% VAT rate, while desirable by many, is unlikely; the headline VAT rate is a useful revenue raising measure. Increasing the threshold for cash-receipts basis of accounting, and the VAT registration thresholds, may support businesses to deal with the current challenges. Old reliablesPetrol and diesel excise increases may feature, particularly in the context of requirements to address climate change. Increases in the excise to diesel only to bring it in line with the cost of petrol at the pumps is more likely. Excise increases on alcohol and cigarettes is possible but the hospitality sector has already taken a battering due to COVID-19 and any further perceived attacks may not be in favour. ConclusionOverall there isn’t the fiscal space for wide-ranging and significant tax reductions and reliefs in Budget 2021. But the Budget 2021 equation must consist of tailored tax measures to support and stimulate the hardest hit sectors of the Irish economy and defend against the impacts of a possible disorderly Brexit on the economy while also satisfying climate change targets.Kim Doyle FCA is Tax Director, Head of Tax Knowledge Centre in Grant Thornton.