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.

Dr Brian Keegan explains why one of Donald J. Trump’s lasting legacies could be tighter regulation for Europe’s digital sector. The early weeks of January were dominated by attempts to handle emergent Brexit problems, resurgent COVID-19 problems, and the Trump presidency’s last days. No sooner does one issue get resolved than another pops up to take its place. In times past, wealth was defined in terms of real assets. The defining asset of the 21st century is data. In late 2020, the EU Commission fired a dual salvo of legislative proposals almost lost amid the Brexit and COVID-19 noise. The proposed new Digital Market Act will deal with cartels, and the proposed new Digital Services Act will deal with content. Along with the Digital Tax Proposals, they complete a triad of initiatives to deal with information industries. The EU’s messaging for the Digital Market and Digital Services acts is a simple one. The idea is that what is illegal offline should also be illegal online. That sounds compelling in theory, but the practice could be very different. The Digital Markets Act addresses the businesses that the EU call “gatekeepers” – perhaps including social media platforms like Facebook and LinkedIn, search engines such as Google, Bing and Yahoo, and business intermediary platforms, including Amazon, eBay and Alibaba. The Digital Market Act’s likely targets are not European, but rather headquartered in the US or Asia. Europe is already finding that when it attempts to tax digital enterprises by reference to market presence, the home country jibs at the prospect of losing tax revenue. Regulation, however, is a different matter. If the Digital Market Act is successful in outlawing anti-competitive practices and is applied consistently, a properly regulated environment can attract reputable business while enhancing choice for businesses and consumers alike. The Digital Services Act, on the other hand, is aimed at consumer protection. It contains rules that would enforce the removal of illegal goods, services or content being promoted or sold online. What is considered “illegal” is anything that may be illegal in any EU member country. This is an unusually broad definition, which appears to work on the assumption that legal, cultural and consumption norms are the same right across Europe. As such, the proposals are a multi-bladed weapon directed at a Hydra-headed creature and have a particular focus on platforms that reach more than 10% of the European consumer base. In early January, the world saw just how powerful such a weapon might be when Twitter permanently suspended the account of the then President of the US, Donald Trump. From the point of view of the major social media platforms, that may have unforeseen consequences. Governments become irritated when the private sector wields power that they themselves do not possess, and the exclusion of Trump was an extreme example. Thierry Breton, one of the EU Commissioners sponsoring the proposed digital legislation, commented that “it is not only confirmation of the power of these platforms, but it also displays deep weaknesses in the way our society is organised in the digital space”. Twitter’s action also prompted critical comment from MEPs and German and French leaders. This political reaction could well ensure that the Digital Market Act and the Digital Services Act move more speedily through the EU’s often labyrinthine acceptance and ratification processes. The proposals were drowned out by Brexit and COVID-19, but will endure long after both crises have passed. The ultimate result of a US president’s actions and the well-intentioned response of Twitter could be earlier and tighter regulation of the digital space in Europe. Dr Brian Keegan is Director of Advocacy & Voice at Chartered Accountants Ireland.

The Public Policy staff in the Chartered Accountants Ireland Advocacy and Voice Department write: On 24 December 2020, the EU and UK negotiating teams reached agreement in principle on a Trade and Cooperation Agreement (“the Agreement”), which provides for tariff-free, quota-free trade (where rules of origin criteria are met) and for sectoral cooperation in a number of important areas. The Agreement does not govern trade in goods between Northern Ireland (“NI”) and the EU where the Protocol on Ireland and Northern Ireland will apply. This means that no new procedures will apply to goods moving between NI and ROI (and the other Member States of the EU). We have assembled information on some key areas to help practitioners navigate the new trading environment. You can find further information on any of these areas in our Brexit hub. We continue to engage with UK and EU stakeholders on the changes that Brexit is bringing. For up-to-date information on Brexit developments and technical analysis, sign up for Brexit Digest. Recognition of your Chartered Accountancy qualification The UK’s departure from the EU results in some changes in the standing of the Irish ACA/FCA qualification. Students and Members in ROI who are EU citizens and who have qualified and gained the requisite experience in the EU prior to the end of the transition period, will experience no change in their rights and protections under the EU Qualifications Directive (Directive 2005/36/EU). Students gaining the Irish qualification in NI/UK post Brexit will be receiving a European qualification awarded in a third country. Members who are UK citizens (or other non-EU citizens), who qualified in NI/UK prior to the transition period and who have met the required EU-based experience requirements, will no longer be able to access the rights, among other things, to have their qualification recognised within the EU under the EU Qualifications Directive as they are not EU citizens under this Directive. The Irish ACA qualification continues to be recognised in Irish and UK law and members on both sides of the border continue to have mobility rights under the Common Travel Area (CTA) agreement. Additionally, members of this Institute will continue to have access to practice rights on both sides of the border. More information on the qualification’s standing in terms of Irish and UK law can be found here. VAT on services This section will be of immediate interest to practitioners with cross-border clients, and who need to raise fees for their services. From 1 January 2021, NI continues to follow the EU’s VAT rules for goods. However, as the UK-wide VAT rules for services will apply to NI, NI VAT-registered businesses are required to follow a dual VAT regime from 1 January 2021. The UK continues to levy VAT and the rules relating to UK domestic transactions continue to apply to businesses as before Brexit. VAT procedures for trade in services largely remain the same as those prior to 31 December 2020, but there are some changes to the VAT rules and procedures for transactions between the UK and EU member states. The VAT rules applying for supplying services between the UK and Ireland are now the same as the current rules for supplying services outside the EU. Broadly, the VAT treatment applicable to the supply of most business-to-business (B2B) services between Ireland and the UK will depend on the place of supply (i.e. the place of supply is the place where the business receiving the services is established). Using the example of an ROI business, if it receives services (including accounting services) from a business, including an accountancy firm, based in the UK after the transition period, in general Irish VAT will be due on the services. If an ROI practitioner provides services to a business based in the UK after the transition period, in general, UK VAT will be due on the services. See Revenue guidance and HMRC guidance. For business-to-customer (B2C) supplies of services from 1 January 2021, Irish VAT should not arise on the supply of certain services such as accounting, legal and consultancy work to non-business customers in GB or NI. If a UK business supplies accounting services to non-business consumers outside of the UK, the services are supplied where the customer belongs and are therefore outside the scope of UK VAT. See revenue.ie and gov.uk for more information. VAT on goods This Institute and the NI Tax Committee, chaired by Alan Gourley, have been engaging with HMRC on various Brexit matters, including customs changes and the NI VAT regime, throughout the course of 2020 and extensively on VAT in particular in recent months. We will continue to do so in 2021. For information on the VAT changes under the NI Protocol, VAT registration requirements in NI, VAT reporting obligations and key VAT system changes, distance selling rules and VAT on trade in goods between NI, ROI and GB, see our dedicated VAT information page on the Institute’s Brexit hub. VAT margin scheme on second-hand cars for Northern Ireland In mid-January, it was announced that the UK Government is seeking to reinstate the VAT margin scheme in NI on second-hand cars purchased from GB, in order to avoid a substantial increase in prices. This Institute has been lobbying HMRC to seek a derogation from the EU and reinstate the scheme for such goods and guidance has been released. We are in contact with Irish authorities seeking clarification on the position in ROI going forward and similarly whether the margin scheme can apply when second-hand cars are purchased in NI from GB and then onward sold to a car-dealer in ROI. We will keep members updated. Customs GB has left the EU’s Single Market and Customs Union meaning GB no longer benefits from the free movement of goods within the EU, and customs declarations are now required to move goods. NI remains in the EU’s Single Market and Customs Union for trade in goods only. This means that trade between the EU (and ROI) and NI remains largely unchanged. Members involved with importing/exporting particularly between GB and ROI are recommended to sign up to receive Revenue’s eCustoms notifications by contacting ecustoms@revenue.ie. For detailed information on the new customs rules visit our Brexit web centre. Data flows Cross-border data flows enable trade. We know that many businesses rely on the ability to transfer personal data about their customers or employees in order to offer goods and services. For example, an NI company’s payroll could be processed across the border in ROI. Any restriction on the ability of this data to flow freely would act as a trade barrier. Data protection did not form part of the Agreement but it has been agreed that an adequacy decision by the EU on the UK’s data protection regime will be made within six months i.e. by 30 June 2021. For now, data can continue to flow between the EU and UK as before which is good news in particular if you are outsourcing your IT or payroll function to a cross-border organisation. For more information see our website. Cross border workers The Common Travel Area arrangements will protect the rights of many of the estimated 23,000 to 30,000 cross border workers who live in one part of the island of Ireland and work in the other. While Irish nationals can continue to enter and work in the UK under the Common Travel Area agreement (and vice versa), this does not cover EU nationals living in Ireland and travelling across the border for example. Under the new UK immigration system that came into effect on 1 January 2021, both EU and non-EU nationals will be treated equally. Employers in Northern Ireland in particular should ensure that employees from other EU Member States are aware of, and encouraged to apply for, the EU Settlement Scheme which is open for applications until 30 June 2021. Employers should take action in light of new the post-Brexit immigration system, including verifying qualifications, considering the requirements under the new points-based system, and availing of any possible temporary transitional immigration schemes which may assist. Links to further information on employee mobility post Brexit can be found on our website. Online shopping Brexit was always going to bring new trading rules; and the costly impact of the UK’s departure from the EU has been felt by online shoppers since the start of the year. VAT and customs charges which until now might have earned a brief glance by online shoppers on payment screens, are now causing costs, confusion and even shipping delays. Most notably, consumers in ROI should be aware of the following changes when buying from GB (not NI): • If the good costs more than €22 (the customs value plus transport, insurance and handling charges), Irish VAT will apply. This VAT is generally payable by the buyer, unless like Amazon, the company picks up the bill. The €22 threshold will be abolished from 1 July 2021. • Orders with a value below €150 (including transport, insurance and handling charges) will not be liable to Irish customs charges regardless of where the goods are made. • The free trade agreement states that there will be no customs duties on goods coming to ROI from GB where those goods are made in the UK. However, if you purchase something online that costs more than €150 and it is not made in the UK, customs duties will apply for the buyer and the rate of the charge will depend on the type of product ordered. You can find all the rates in the TARIC database. • See Revenue.ie for more information. For consumers in GB, buying goods online from ROI/EU Goods with a value of STG£135 or less: • If the goods are outside the UK and sold through an online marketplace to customers in GB, the goods will have UK supply VAT charged at the point of sale. • If the goods are outside the UK and EU and sold through an online marketplace to customers in NI, the goods will have import VAT charged. Consignments valued at more than £135 Normal VAT and customs rules will apply on importation of the goods into GB from outside the UK or into NI from outside the UK and EU. This means that the customer will have to pay VAT to Royal Mail for example before the goods can be delivered. Customs The free trade agreement eliminates customs duties on goods coming to GB from ROI where those goods are made in the EU. If this isn’t the case, UK tariffs could apply and the rate will depend on the goods purchased. For more information see gov.uk.

In a letter to the Chancellor of the Exchequer Rishi Sunak, Institute President Paul Henry has set out the necessity for HMRC to extend the 2019/20 self-assessment deadline given the recently announced further restrictions in all regions of the UK due to rampant change in the nature of the Coronavirus pandemic. Chartered Accountants Ireland has called on the UK Government to introduce a short once-off and one month extension to the 31 January 2021 filing deadline to ensure businesses and their accountants are given sufficient time to prepare and file returns in adherence with public health requirements. Although Chartered Accountants will make every effort to ensure that as many tax returns as possible are filed on time, due to the extraordinary circumstances of the pandemic, there will be instances where it is just not humanly possible to make the deadline. A short extension to the filing deadline is essential for our members in business and practice who are doing all possible to meet their tax obligations in the most difficult of circumstances. Since the Institute published its position paper the Next Financial Year last summer, the Institute has been lobbying HMRC for automatic suspension of late filing penalties for a period of three months in addition to enhanced Time to Pay (“TTP”) for 2019/20 self-assessment tax debt. We have discussed this with HMRC at various forum meetings including meetings of the Representative Body Steering Group (the highest level forum meeting of stakeholders), the Virtual Communications Group monthly meetings and at bespoke meetings over the course of 2020. Although our recommendation for enhanced TTP was endorsed  by the Chancellor in the September Winter Economy Plan, HMRC has to date resisted any change to the forthcoming filing deadline. HMRC’s most recent communication indicated that its position in respect of the forthcoming self-assessment deadline is unchanged. The full message from HMRC is as follows:- “I am grateful for the evidence you have provided and the constructive engagement you have had with my policy teams. We have carefully considered your request. Many of you were on the Representative Bodies Steering Group call on 16 December, when Angela MacDonald discussed with you that we do not currently plan to waive late filing penalties. Let me explain our reasons. Our SA message this year is a simple one: We want to encourage as many customers as possible to complete their returns by 31 January 2021, even if they can’t pay in full, because filing their return is key to crystallising their SA liability and being able to get our support, if they need it, to pay their tax. But no-one will have to pay a penalty if they cannot file on time because of the impact of the COVID-19 pandemic. We do not want to complicate this message by sending a blanket signal that it’s OK to file late. That could have some serious disadvantages for our customers; de-coupling the payment and filing dates might confuse customers, and even lead to non-payment, interest accruing, and late payment penalties being triggered. It would also encourage some customers to file late who really don’t need to. We know that some customers will not be able to file on time because of the impact of the pandemic on them or their tax agent. These customers should get their returns in as soon as they can. We will not penalise people who need more time. We will accept pandemic-related personal or business disruption as a reasonable excuse. If their return is late due to pandemic-related delay on the part of an agent, this will also be a valid reasonable excuse. In the event that someone who has been unable to file on time receives a penalty notice, they or their agent will be able to get this cancelled easily by contacting HMRC. We are giving customers and agents more time by extending the penalty appeal period to 3 months. I know you will be disappointed that our decision is not what you and many of your members wanted. I understand and sympathise with the extreme pressures your members have been under in this exceptional year: they have helped deliver the economic response to the pandemic, helping UK businesses get the support they need while at the same time suffering the effects of the pandemic on their own firms. I am very grateful to them for their valuable and vital work. At present, filing rates are holding up well, but we will continue to monitor the situation during January and keep matters under review.” Our members survey last month indicated a preference for automatic suspension of late filing penalties.   However, the announcement of enhanced restrictions earlier this week due to the rampant change in the nature of the Coronavirus mean that businesses and their accountants face extreme difficulties, and the Government must extend the 31 January 2021 deadline and lift late filing penalties to ensure tax obligations can be fulfilled safely. Members will be kept abreast of developments on this issue in eNews and Chartered Accountants Tax News.

Revenue announced the extension of the 2019 Pay and File deadline until 6pm today, 11 December 2020. Chartered Accountants Ireland made representations to Revenue on technical difficulties members were experiencing with ROS throughout the week, particularly on Monday.  Revenue acknowledges the efforts of taxpayers and agents in working towards the deadline on its announcement of the extension. Revenue confirmed the extension yesterday afternoon in a press release. The total number of 2019 income tax returns filed as of yesterday afternoon was in excess of 500,000.

The fifth annual Good Governance Awards concluded on 19 November 2020 with the announcement of the winners of the annual report awards across six categories. These categories are based on turnover including a new category this year for very small non-profits with an annual turnover of less than €50,000. One of the main aims of the Governance Awards is to improve the overall standard of annual reporting in the charity and non-profit sector and to provide specific feedback to all entrants alongside guidance on how to improve their annual reports, including their financial statements and disclosures.   Each of the annual reports goes through a very rigorous assessment but underpinning the many assessments and checklists there are some key elements or features which are essential in the eyes of the assessors and judges. In the spirit of improving standards, we have compiled a summary of the top ten judges’ recommendations arising from their assessment of this year’s shortlisted annual reports. We have also included the top ten comments from our assessors in relation to annual reports that were not shortlisted. Top ten judges’ recommendations Ensure the annual report tells a story, in a way which is easy to follow and easy to navigate. Make the link between the charity’s purpose, objectives, and expenditure apparent throughout the report. Focus on clarity and conciseness. The length of some annual reports raised questions concerning the additional value being added with very detailed accounts of activity. Use metrics and key performance indicators (KPIs) to describe achievements. Provide context by disclosing the targets against which KPIs are measured and, where applicable, disclose the prior year’s KPIs. Including a trend analysis of KPI performance over, say, a three-to-five-year period, was highlighted by the judges as good practice. Report on the organisation’s governance structures and processes and describe how adherence to good governance is embedded throughout the board and the organisation. This should include disclosing board members tenure and the approach to board succession planning. Avoid generic risk reporting and emphasise the key and specific risks the organisation faces, how these are being managed and expand into detail on what the board consider to be the current fundamental areas of risk. Include a clear explanation of what reserves are held by the organisation, including an indication of whether these are high, low or within expectations of the board. Material movements between reserves should be explained. Provide clear explanation for a deficit, if it arises, including whether this position is likely to persist and what actions or measures are being taken to address the underlying cause(s). For charities and other non-profits organisations that work with vulnerable adults and children, ensure that safeguarding (measures to protect the health, well-being and human rights of individuals, which allow people to live free from abuse, harm and neglect) is addressed in the annual report.There were some excellent disclosures on safeguarding included in some of the shortlisted organisations this year. Disclose how the charity or non-profit organisation is addressing matters relating to sustainability, cyber security, data protection, diversity and inclusion. These matters are of increasing interest to the readers of these reports. Top ten assessor comments on annual reports that were not shortlisted Ensure that there is a link between the non-financial narrative and the financial statements in the annual report. They should not read as two standalone documents. Review the report for consistency. There were notable instances where the financial statements reported a deficit but there is either no mention of this in the narrative of the annual report or a deficit of a different magnitude is referred to in the narrative. Some reports included a very upbeat and positive narrative describing the organisation’s many achievements, with little or no mention of the challenges, but the financial statements presented a different story. Ensure basic governance disclosures are included, such as providing an explanation of the operation of committees and the recruitment, induction and qualifications of board members and their tenure on the board. In addition to describing the organisation’s activities, describe the key risks and challenges faced by the organisation during the financial period. Disclose the organisation’s mission, vision and values and link these with disclosure of the organisations objectives for the financial period, key performance indicators, etc. Ensure the annual report includes transparency in relation to the various sources of funding accessed by the organisation during the financial period. Ensure the income and expenditure account, or statement of financial activities (for those apply the Charities SORP (FRS 102)) is presented showing restricted and unrestricted funds separately. Review, before submission, the financial statement disclosures to ensure they are complete (required disclosures are included), consistent with the information presented in the financial statements and elsewhere in the annual report and provide any additional information necessary to assist the readers understanding of the organisations successes and challenges faced during the financial period. Prepare an annual report that includes both the non-financial narrative and the financial statements to facilitate readers getting a better understanding of the financial position and key drivers for financial performance. Opt-out of the right to prepare financial statements in accordance with Section 1A of FRS 102 or to file abridged or abbreviated financial statements. This is sub-standard to good governance practice for charities and non-profit organisations reliant on government grants, fundraising from the public or other sources of charitable or voluntary donations (e.g. philanthropy or people volunteering their time to help others). We hope that the above observations and feedback comments will help in improving the standard of annual reports, including financial statements next year. Diarmaid Ó Corrbuí, CEO Carmichael. Email diarmaid@carmichaelireland.ie    

Conal Kennedy, Head of Practice Consulting, writes: As the year draws to a close, many members in practice pause to reflect before starting their work in the New Year. Sometimes members will make plans to build their practices through organic growth, or to consolidate what they have in the New Year. In other cases, the turn of the year may lead them to conclude that more fundamental changes need to be made. Is it time to consider merging your practice with another, or selling it? You may have been generally interested in buying a practice or a block of fees, but is now a time to pursue this more vigorously? We in Practice Consulting are sometimes approached by firms to assist them with one of these ventures. If you are interested, feel free to contact us and we will endeavour to advise you and possibly to reach out to make contact with other firms on a confidential basis. We are particularly interested in hearing from members who would like to retire and sell all or part of their practice. We may also be able to help members who are currently sole practitioners but would be interested in joining a larger firm as a partner. We also need to hear from those people representing the opposite sides of these transactions, the potential purchasers or those larger firms. If you would like to discuss this further please contact us individually at the contact points below or email us at practicemembers@charteredaccountants.ie in confidence.

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.