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Temporary relaxation of banking accounting rules

As many banks and institutions hastily roll out process changes in light of the coronavirus outbreak, the European Commission has also announced a temporary relaxation of banking accounting rules. It aims, by making the move, to ensure that lenders can continue to extend loans to organisations struggling during the Covid-19 crisis, in a bid to ensure a coordinated EU response and avoid national fragmentation.

The proposals tabled last week include a few targeted ‘quick fix’ amendments to the EU’s banking prudential rules (the capital requirements regulation) in order to maximise the ability of banks to lend and absorb losses related to coronavirus.

Mitigating impact

A number of exceptional temporary measures aimed at alleviating the immediate impact of Coronavirus-related developments – by encouraging greater flexibility in approach – have also been proposed by the European Commission.

These include adapting the timeline of the application of international accounting standards on banks’ capital, treating more favourably public guarantees granted during this crisis, by postponing the date of application of the leverage ratio buffer and modifying the way of excluding certain exposures from the calculation of the leverage ratio.

The Commission is also proposing to advance the date of application of several agreed measures that incentivise banks to finance employees, SMEs and infrastructure projects.

Increased flexibility

In what could be further welcome news to accountants, the Commission has published an ‘interpretative communication’ confirming the recent statements on using flexibility within accounting and prudential rules, such as those made by the Basel Committee of Banking Supervision, the European Banking Authority (EBA) and the European Central Bank, amongst others.

These include the flexibility available in EU rules when it comes to the classification of non-performing loans in the context where relief measures, such as guarantee schemes and moratoria, have been provided either by member states or by banks.

The published communication document clarifies that the application of relief measures alone – which banks or member states grant households and businesses to bridge short-term liquidity needs, such as delays in the repayment of loans – should not automatically lead to a harsher accounting treatment of the respective loans.

It further states that the temporary inability of households or businesses to pay back their loans due to the coronavirus pandemic should not mean that banks have to automatically increase their expected credit loss ECL provisions under IFRS 9.

Instead, banks should use their own judgment when determining whether expected credit losses are required to be recognised.


The Commission also specifically recommends that banks should ‘act responsibly’ at this time, providing examples such as refraining from making dividend distributions to shareholders or adopting a conservative approach to the payment of variable remuneration.

Valdis Dombrovskis, executive vice-president at the European Commission, said: ‘We are supporting households and businesses as much as we can to deal with the economic fallout of the coronavirus.

‘The banking sector can do a lot to help here. We are using the full flexibility of the EU’s banking rules and proposing targeted legislative changes to enable banks to keep the liquidity taps turned on, so that households and companies can get the financing they need.

The Commission has further announced a series of roundtable discussions to bring together consumer and business groups with the financial sector in order to address urgent needs.

For those of you who’d like to read the full European Commission interpretative communication, that can be found here. And if you’d like some further stimulating reading at this time, why not also digest the Proposal to amend Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms.

Managing your Mental Health at Work

We’re here to champion you all in looking after yourselves and your own mental health, by providing some guidance for staying mentally well at work. Many of us are starting to return to work in one way or another, so make sure you’re fully prepared to be at your best. Our tips below are curated from CABA, Mind, and our own practical experiences.

The relationship between work and mental health

Maintaining paid employment is generally considered to be a good thing. As well as earning a living, having a job provides identity, contact and friendship with other people, and a way of can give structure and purpose to your day-to-day life. And while it’s possible to thrive without paid work, unemployment is often linked with poor physical and mental health, and poverty.

However, paid employment brings its own pressures on your mental health. The Health and Safety Executive (HSE) estimates that every year around 2 million people experience a health problem caused by their current or past work. Stress is the largest cause of work-related illnesses, so our tips today generally focus on that.

If you already have a mental health problem, maintaining paid employment can be a challenge: the pressures of work may sometimes make you feel worse, or you may feel that you can’t be open about your condition to your boss or colleagues. However, with understanding and support from your employer, and a little bit of flexibility, work can be a positive experience.

Dealing with stress at work

While numerous combinations of factors can cause stress, taking action, however small, can improve your life at work or prevent stress developing in the first place. Some things you might be able to do might not need to reference to anyone else, but some things you will need to negotiate, formally or informally, with colleagues or managers.

Taking control yourself

  • Develop helpful relationships with colleagues so you can build up a network of support.
  • Talk to someone you trust about what makes you feel stressed, and say if you need help.
  • Write a list of what needs to be done to help you to prioritise, focus and get things in perspective. It can also feel satisfying to tick items off once they have been done.
  • Take regular breaks and get away from your desk or situation for a few minutes every hour. Get out of the office completely at lunchtime if possible.
  • Keep to regular working hours as much as possible and take all the leave you’re entitled to when you need it.
  • If you are provided with opportunities to have some input, particularly in decisions that may impact you, then take advantage of those opportunities.
  • If you are working from home, make the most of opportunities for contact.
  • Maintain a healthy work-life balance – nurture your outside relationships and interests, and skills.
  • Make sure you drink enough water and that you eat during the day to maintain your energy levels.
  • Learn some relaxation techniques.

Working with your employer

  • Work out what you find stressful in the work environment, e.g. unrealistic targets; and what helps you work well, e.g. a quiet space. Then talk to your employer about potential solutions.
  • Discuss your workload with your manager or supervisor and set realistic targets for what you think you can achieve, balancing your health with their expectations.
  • Find out how your goals fit in with the organisation’s overall aims and objectives so that you can see a real purpose to your work.
  • Discuss the possibility of flexible working hours if that will be helpful to you.
  • Make your physical work environment as comfortable to work in and appropriate to your needs as you can. If necessary, seek the help of a health and safety representative.
  • Make use of the support already on offer. Some organisations provide employee assistance programmes, providing free advice and counselling. Others have internal systems such as co-worker support.

If you feel able, please share your best stress management advice via Twitter and Facebook to support your peers and colleagues.

CIMA exams from home now on the go

CIMA announced the delivery of its first-ever at-home exams to students across the world, as a result of the ongoing COVID-19 pandemic and its effects on how we all move and work. So far, things seem to have gone well. But can we expect at-home exams to stay with us after lockdown finishes?

Carrying on

CIMA previously announced its new exam process as a means to keep its students engaged and progressing, even though its regular test centres might be closed. The Association of International Certified Professional Accountants, the unified voice of CIMA and the American Institute of CPAs, said it had been developing a testing solution since the early days of the pandemic.

“The road ahead will of course be difficult but management accountants can really put their skills to use to help their organisations, and showcase how much value they bring to businesses,” said Stephen Flatman, vice president of examinations — management accounting, in a published statement. “We are proud of the great resilience our students are showing to keep their careers moving, and steadily grow the pool of finance professionals able to help organisations navigate even the most uncertain and complex times.

“Our colleagues and partners worked hard to come up with and deliver an at-home testing solution for our students in a very short amount of time,” Flatman added. “This change in our approach has so far enabled students from over 70 countries to progress their studies, book their CIMA exams and get them closer to earning the CGMA designation.”

Making it work

The few students that have taken papers online so far have been positive about the experience. “I was feeling rather nervous about sitting my exam, especially under new and unfamiliar conditions,” said Matthew Barton, a CIMA student, in a statement. “But once I clicked the ‘begin exam’ button the process was very smooth, it’s close enough to the test centre experience so it’s not worth delaying your studies until they can reopen. I feel a lot better about the process now and will sit another exam next month.”

As you know, taking an exam can be stressful enough, and the last thing you’ll want to happen will be a technical failure, so CIMA have robustly tested their system to ensure it provides a seamless and efficient performance. You’ll need to be just as confident in your own computer and internet connection to make the process work for you.

Help is at hand

The CIMA website is full of useful further information with videos on how to make the process work, plus advice on scheduling and much more. Visit their site here.

Our team are also still contactable online, and are very happy to answer your tuition, revision, and exam-related questions. If you choose to sit your exam online at this time, please don’t think your paper will be any easier than usual. You’ll need to be just as prepared and diligent throughout the process as you normally would, but do get in touch with us if you’d like any support.

As for the future? Like many things that have found a new home online during this crisis, we think it will take a very good reason to go back to the ‘old’ ways!

Making sense of furlough

As we start to unpick and adapt to new ways of living and working, we thought it would be helpful this week to go into more detail about the government’s job retention scheme – in particular looking at what accountants need to know to make it work for their organisation.

Keeping moving

In these uncertain times, liquidity is essential. Wherever possible, businesses should focus on revenue streams that can be maintained, or whether new sources of revenue might be created.  For example, some perfume and alcohol manufacturers have switched to producing hand sanitiser or the raw materials for producing hand sanitiser to address current shortage.

Expenditure should be minimised: staff costs are invariably a major expense and many businesses will have undertaken a thorough review of staffing levels for the ‘lockdown’ period. This is where the Coronavirus Job Retention Scheme (CJRS) comes to the rescue.

The Government has stressed that the scheme is open to businesses that “cannot maintain their current workforce because [their] operations have been severely affected by coronavirus”.  The overriding objective is to avoid wide-scale redundancies.

The CJRS provides employers with a financial cushion – providing a subsidy of the lower of 80% of employee’s pay or £2,500 per month – to retain their workforce.  This is on the basis that the relevant employees cease to work in the business for a temporary period – known as ‘furloughing’.

Designation and employee’s agreement

A wide range of employees (e.g. full/part time, agency employees, apprentices, and employees on ‘zero-hour’ contracts) are covered by the scheme. Furloughed employees must be on the payroll on or before 19 March 2020 and notified to HMRC on a RTI submission by that date – this is an important change from the original cut-off date of 28 February 2020.

Furthermore, employees that were working in the business on the original cut-off date of 28 February 2020 but were made redundant between then and before 19 March 2020, can also qualify, provided they are re-employed by the company. Contrastingly, those who started a new job after 19 March 2020 would not be eligible.

This scheme is now set to last until the end of June 2020 but the Government may extend it should circumstances require so.

Businesses must determine those employees selected for furloughing under the scheme.  To be eligible, the relevant employees must be individually notified in writing, and employers must retain this notice for five years. Updated guidance now stipulates that employees must specifically agree that they are unable to work for the company during the furlough period.

Employees must be furloughed for a minimum of three consecutive weeks.  To allow flexibility, they can be furloughed a number of times (subject to each period being at least three consecutive weeks). Therefore, some companies might wish to rotate their furloughing arrangements between different employee groups.  Employees should receive a ‘notice’ letter every time they are placed on furlough.

It is an absolute requirement of the scheme that employees cannot do any work for the claimant business while they are furloughed, although it is feasible for furloughed employees to engage in training or volunteer work during their absence.  Each employment is treated separately for the purposes of the scheme and it is permissible for employees to work for another employer (subject to the terms of their employment contracts etc.).

Employees that cannot work because of care responsibilities can be included in the scheme, where they are unable to work from home and would have otherwise been made redundant. Those on actual ‘sick leave’ or ‘self-isolating’ would be eligible for statutory sick pay (‘SSP’) instead (paid at the rate of £95.85 per week from 6 April 2020) but they can be furloughed on their return to work.

Employment law issues

In the vast majority of cases, furloughing (at a reduced pay rate) represents a change in the terms of employment contracts. Therefore, this would need to be negotiated with the relevant employees and require their agreement.

There is still no definitive guidance on the question of holiday entitlement. Businesses may be able to exercise their right to require employees to take holiday during their furlough period.  According to recent ACAS guidance, where employees have agreed to take holiday on this basis, they must be paid their full pay. In such cases, the appropriate scheme subsidy can still be claimed and this period still counts as part of the minimum three-week furlough period.  Employers would then need to supplement the ‘subsidy’ to provide full holiday pay.

Given the potential issues mentioned above, it is strongly advisable to seek appropriate advice from an employment lawyer.

Salaried company directors may also be furloughed, but they must cease working for the company for the relevant period (though they can still discharge reasonable legal duties without invalidating their CJRS grant entitlement). However, claims may not include dividends paid to them (which tends to be their main method of extracting cash from the company).

Basic mechanics of the scheme

To qualify under the CJRS, organisations must have a current UK bank account and have made a Real Time Information (‘RTI’) submission by 19 March 2020 (another important change from the original HMRC guidance). There are no further restrictions based around size or business sector.

Businesses must calculate each furloughed employee’s entitlement. The CJRS grant for each furloughed employee is 80% of their ‘normal’ salary or wages, ‘capped’ at £2,500 per month. While past overtime can be included in the figure for ‘normal’ salary/wages, it is not possible to include discretionary bonuses, tips and non-cash payments (i.e. benefits in kind).  Similarly, benefits provided via a salary-sacrifice arrangement are excluded.

The full amount of the CJRS subsidy must be paid to the employees and directors. In addition, the CJRS grant covers relevant employer national insurance contributions (NICs) and the employers’ minimum automatic enrolment pension contributions on the reduced pay, where appropriate.  Apprenticeship levy payments are not covered and must still be paid by the business.

Other computational aspects

Employees on variable pay can claim the higher of either the same month’s wage from 2019 or the average of monthly earnings from the 2019/20 tax year. For those employed for less than a year, an average monthly earnings figure is taken.

Under the scheme, the maximum monthly grant per employee would be around £2,803, as calculated below:

Maximum salary  2,500.00
Employer’s NIC – 13.8% x £1,768 (£2,500 less £732 ‘monthly’ secondary threshold)     243.98
Minimum employer auto-enrolment contribution – 3% x 1,980 (£2,500 – £520)       59.40
Total £2,803.38

All furlough payments are taxed (and subject to NICs) in the normal way.  The CJRS grant is taxed as part of the business trading profits.

While employees are on furlough, there is no obligation to comply with the national minimum and living wage legislation – except where employees are undergoing training, when businesses must ensure the appropriate minimum wage is paid.  Thus, if the CJRS grant does not cover this, the employer must arrange for a suitable ‘top-up’ wage.

Some businesses may decide to ‘top-up’ the employee’s pay above the 80% monthly salary limit or the £2,500 monthly cap, but bear in mind how this will affect the rest of your business.

Processing CJRS claims

The online system for uploading claims is now live, and it is expected that HMRC will begin to make payments from 30 April. The system will operate ‘round the clock’ and will have a queuing process when demand is high. Importantly, tax agents are able to make CJRS claims on behalf of their clients.

Scheme claims must be made using the online service. If the business has not registered for HMRC’s ‘PAYE Online for employers’ service, this should be done promptly as it can take 10 days to be activated.

Employers must calculate their own scheme claims for the relevant period.  HMRC has indicated that the CJRS claim should be aligned to the actual payroll amounts when or before the payroll is run.  Businesses must enter the following details to make the claim (which is made every three weeks):

  • ePAYE reference number
  • Number of employees being furloughed
  • Start and end date for relevant claim period
  • Total amount claimed
  • Company bank account number and sort code
  • Company contact name and telephone number

Keeping records

All claims are made on a self-certifying basis and HMRC reserves the right to subsequently audit the CJRS claims.  It is therefore strongly recommended that businesses prepare a contemporaneous paper to document their furloughing arrangements and computations.  This should include the business case for furloughing relevant employees/workforce groups as a result of Covid-19.

HMRC plans to build in appropriate verification checks as part of its processing procedure to ensure the validity of claims.  Where abuse is found, HMRC will clawback the relevant scheme payments and, where appropriate, consider criminal action against fraudulent businesses.

Managing your mental health in difficult times

Following last week’s post about maintaining productivity while working from home, we also think it’s important to share some advice on how to manage your mental health during this difficult time. Many people will find such confinement a real challenge, while others will see their emotions and mindset go up and down while stuck inside for days on end. So, here’s some guidance on staying mentally well through dark days.

Look for meaning, not happiness

When researchers and clinicians look at who copes well in crisis, it’s not those who focus on pursuing happiness to feel better – it’s those who cultivate an attitude of what’s known as “tragic optimism”.

To understand how tragic optimism might serve us during the pandemic, it might help to recall how the country responded to the 7/7 terrorist attacks fifteen years ago. People in London reported increased feelings of fear, anxiety and hopelessness, and these emotions were more debilitating for some than for others. But what set the more resilient Londoners apart was their ability to find the good.

That didn’t mean they denied the tragedy of what happened – they too felt the sadness and stress of the situation. Even in the darkest of places, they saw glimmers of light, and this ultimately sustained them.

But even more than helping people cope, adopting the spirit of tragic optimism enables people to actually grow through adversity.

Growing through trauma

For a long time, many psychologists embraced a victim narrative about trauma, believing that severe stress causes long-lasting and perhaps irreparable damage. Yet only a small percentage of people develop full-blown PTSD while, on average, anywhere from one half to two-thirds of trauma survivors exhibit what’s known as post-traumatic growth.

After a crisis, most people acquire a newfound sense of purpose, develop deeper relationships, have a greater appreciation of life and report other benefits. Those who grow spend a lot of time trying to make sense of what happened and understanding how it changed them. In other words, they search for and find positive meaning.

Hope in times of crisis

Of course, some people are naturally more hopeful than others. But the success of psychological interventions like meaning-centered psychotherapy — developed to help terminal patients cope with death — reveals that even the most despairing individuals have the capacity to find meaning in a crisis.

It may seem inappropriate to call on people to seek the good in a crisis of this magnitude, but in study after study of tragedy and disaster, that’s what resilient people do. Heart attack survivors, for example, who found meaning in the weeks after their crisis were, eight years later, more likely to be alive and in better health than those who didn’t.

This doesn’t mean that people should endure adversities with a smiling face: tragic optimism is not the same thing as happiness.

When people are feeling depressed or anxious, they are often advised to do what makes them happy. Much of the pandemic-related mental-health advice channels that message, encouraging people to distract themselves from bad news and difficult feelings, to limit their time on social media and to exercise.

We’re not suggesting those aren’t worthy activities and won’t provide some short-term benefits. But if the goal is coping, they do not penetrate into the psyche as deeply as meaning does.

When people search for meaning, though, they often do not feel happy straight away. The things that make our lives meaningful, like volunteering or working, can be stressful and require effort. But months later, the meaning seekers tend to report fewer negative moods and also feel more enriched and inspired.

Looking around and looking forward

Though it has been only a few weeks since the pandemic started affecting life as we know it, many are embracing meaning during this crisis. People are organising “help groups” to run errands for vulnerable people. They are rallying around struggling small businesses. Many companies and freelancers, nationally and locally, are offering their services free. People are feeling more grateful to the caregivers, teachers, service workers and health care professionals among us. And while this time certainly won’t be remembered as a happy period in the history of the world, it may be remembered as a time of redemptive meaning and hope.

Does any of this mean the pandemic is a good thing? We’re not saying that: it would be far better had the pandemic never occurred. But that’s not the world we live in. That’s why it’s important to learn to suffer well and look for meaning throughout the mayhem.

How to stay productive while working from home

While it was impossible to foresee how quickly and how drastically we would all have to change the way we live and work given the current crisis, adapting to new situations is an important aspect of any business, so this week we’re here to provide some tips on how to maintain your usual levels of productivity as much as possible.

Challenges of home working

For many of you, working from home will be a huge shock to the system, and might be fairly daunting. And importantly, not everyone’s experiences will be the same, so we can’t necessarily provide one-size-fits-all guidance.

You will all, undoubtedly, be in a different environment – depending on where you are, who is at home with you during this time, your level of connectivity to the outside world, and indeed what other pressures you may under. But there are certain practices and attitudes we can all adopt to try and continue with ‘business as normal’.

Use your colleagues

Remote doesn’t mean alone. If you’re working by yourself at home all day, it can get very lonely, so make sure you check in with colleagues, clients, or even friends throughout the day.

Share when things are going well and get support when it’s not. If you’re normally quite a chatty person in the office, check in with your colleagues – either on the phone or via message – especially if there’s someone you think might not be coping particularly well.

Scheduled catch-ups are also a good way to break up the day, and give you something to work towards.

Have a schedule

Speaking of which, giving yourself a schedule is easily the best way to make yourself productive. Many of you may find yourselves with less work than normal, but being organised about it can mean you complete things efficiently, and boost your overall morale.

Set yourself a specific start time (which can be whatever works for your natural body clock), and allocate yourself tasks (or parts of tasks) dependent on your attention span. Hour blocks are normally quite good, with a short break in between.

Organise your day around meetings that you have in the diary – and make sure you prepare for them accordingly. Just because you’re at home, it doesn’t mean you can skip the prep work you would normally do!

If you don’t have any online meetings or calls book something in – a catch-up with a colleague or a summary email to send at a specific time, so you have a goal.


Keep a routine and act as though you’re               going to work. This helps to keep weekends sacred too.

As part of your routine, set your own start and finish times – ideally the same every day if that’s what you would normally do.

Preserve lunch times, or adjust your hours around your other responsibilities. If children              or others you care for disrupt your plans, don’t worry about it. Take everything a day at a time and change your plans if necessary. Everyone understands that things might not go as smoothly as normal at this time.

Bring your whole self to work

If you’re not getting out and about much, you might feel like you’re just a body lurching from one room to the other. But keeping your energy up is very important to being productive, and exercise can definitely help with that.

Try not to sit down for too long – get up and have a pace around at least every hour – it’s easy   to get stuck staring at the screen. Walk and talk too! Several people are proponents of standing up meetings, so why not do this at home? If you don’t need to be typing or referring to lots of documents during an online meeting, then try doing it on the move.

At the end of the day…

It’s hard to switch off from work at the best of times – but this is even more important when it’s in your living space. Make sure you properly ‘Turn off’ at the end of the day – and that means mobile devices as well!  Keeping that separation between work time and personal time is very important, especially for your mental health during this difficult period.

Double recession on the cards?

There have been various whisperings and teases of businesses already re-opening in the last week – before lockdown has been officially lifted – most notably well-known fast-food chains opening select stores and offering a reduced service. Why? Well one good reason would be to stave off some very dark economic clouds that what have been looming and what many have been predicting as imminent: a global recession, potentially more damaging than the Great Depression. But just how gloomy is the outlook? And what can the next generation of accountants and business leaders do about it?


The EIU has recently released some rather chilling economic predictions, which include no fewer than two global downturns on the horizon.  Perhaps it’s no surprise, then, that governments around the world are giving trillions of dollars in stimulus packages to help prop up their economies, and why we might see some businesses trying to get a head start on their recovery.

Indeed, it is these sovereign debts being racked up that may push the global economy into a second recession, the EIU warns.

“Many of the European countries that are among the worst affected by the pandemic, such as Italy and Spain, already had weak fiscal positions before the outbreak,” said Agathe Demarais, the EIU’s global forecasting director.

“A potential debt crisis in any of these countries would quickly spread to other developed countries and emerging markets, sending the global economy into another – possibly much worse – downturn,” she added.

While this is not a central scenario for the EIU, “the long-term impact on growth of mounting fiscal deficits across Western countries is unknown.” A second, or possibly third, wave of the pandemic would make the scenario far more realistic, the EIU continues.

Numbers in focus

According to Reuters, Britain’s economy could shrink by 13% this year due to the government’s coronavirus shutdown – its deepest recession in three centuries – while public borrowing is set to surge to a post-World War Two high.

In the April-June period alone, economic output could plunge by 35%, with the unemployment rate more than doubling to 10%, according to the Office for Budget Responsibility. A bounce-back may come later in the year if current restrictions on public life are lifted, it added.

Separately, the International Monetary Fund said it expected Britain’s economy to shrink 6.5% in 2020, similar to other economies, before growing by 4.0% in 2021.

Impact on the deficit

The OBR said the hit to tax revenues and the government’s huge spending plans meant the budget deficit could hit 273 billion pounds ($342 billion) in the 2020/21 tax year — five times its previous estimate.

That would be equivalent to 14% of gross domestic product, higher than the 10% level hit after the global financial crisis that began in 2007. Britain had gradually lowered the deficit to about 2%, mainly through a decade of spending cuts for many public services.

The OBR said public sector net debt could exceed 100% of GDP during the 2020/21 financial year but end it at around 95%. Before the government shut down the economy on March 20, the OBR had forecast debt would be 77% of GDP in 2020/21.

“It should be borne in mind that the short- and medium-term outlook for the economy and the public finances would be very much worse without any fiscal and monetary response,” the OBR said.

The Bank of England last month cut interest rates twice, ramped up its bond-buying programme by a record 200 billion pounds and took other measures to help companies secure credit.

Gradual recovery

Consumer demand is unlikely to bounce back to pre-crisis levels immediately when social distancing is lifted and businesses are allowed to reopen – perhaps moreso as people rush back to shops and restaurants and live entertainment they haven’t been able to access in a while.

At the same time, the EIU says global supply chains may still be disrupted as countries lift restrictions at different times, creating bottlenecks. Things certainly won’t be back to ‘normal’ until some time after lockdown is lifted.

“The recovery in the global economy will only be gradual, all the more so as countries will lift lockdowns at different points in time,” comments the EIU.

That means that accountants and business leaders will need to be very careful in their planning to support a gradual recovery at the right time to ensure a smooth return to business. We recommend modelling a number of different scenarios that can then be applied as things progress.

Budget 2020: The fallout for accountants (part 2)

Last week we brought you the first part of our analysis on what accountants need to know to be up to speed following the Chancellor’s Budget announcement on 11th March. A lot has happened since then, so this week we’re combining part two of our analysis with some of the latest updates on how accountants can best support businesses during these difficult times.

Combatting an economic emergency

Hot on the heels of his Budget statement, last week Chancellor Rishi Sunak unveiled a package of financial measures to shore up the economy against the coronavirus impact.

It includes £330bn in loans, £20bn in other aid, a business rates holiday, and grants for retailers and pubs.

Mr Sunak said: ” I want to reassure every British citizen this government will give you all the tools you need to get through this.

“That means any business who needs access to cash to pay their rent, their salaries, suppliers or purchase stock will be able to access a government-backed loan or credit on attractive terms. And if demand is greater than the initial £330bn [for loans] I’m making available today, I will go further and provide as much capacity as required.”

The chancellor said he was extending the business rates holiday to all firms in the hospitality sector and funding grants of between £10,000 and £25,000 for small businesses. Mortgage lenders will also offer a three-month mortgage holiday for those in financial difficulty.

Big impact

The act of offering £330bn in state-backed loans for all businesses through the banking system, with the help of the Bank of England, has proven very reassuring to many, and is quite an unprecedented move. £330bn equates to 15% of the value of the economy. Normally economic announcements are worth a fraction of a percent of national income.

Companies and trade bodies welcomed the announcement, but said they needed to work through the fine print, and we encourage you to do the same – though it may be some days before many details are finalised.

Business response

Johan Lundgren, chief executive of Easyjet, said Mr Sunak’s measure were welcome, but added: “Airlines are facing significant pressure and without government action there is a real risk to the industry. It will be important to work through the detail, but we are already talking to government.”

Retailers, too, have warned the future looks grim without help. The British Retail Consortium (BRC) said the new measures would help ease the burden. BRC chief executive Helen Dickinson said: “The business rates holiday, together with the announcement of a loan package, represent a vital shot in the arm for a sector facing enormous uncertainty. We still need to see the details, but it is a welcome and necessary first step to protect jobs.

Adam Marshall, chief executive of the British Chambers of Commerce, said the size of the grants and loans were good news for smaller businesses. “But what’s going to be hugely important is that cash actually gets to the front line and gets there quickly,” he said.

Visit the website to find out exactly how to apply for emergency funding and support for business.

Supporting employees

Many businesses will be worried about their staff at this time, though the Chancellor is hoping to ease this burden somewhat by enabling statutory sick pay to be paid from the first day of sick leave to anyone advised to self-isolate, regardless or whether they are showing virus symptoms or not.

The government has also pledged to refund the cost of providing statutory sick pay due to coronavirus to businesses under 250 employees, for 14 days. Please visit the government website (above) for more details.

Budgeting for the future?

Commentators generally agreed that the government’s budget aimed to show a sense of taking back control after leaving the EU. Certain legislations such as the abolition of the tampon tax and the reading tax – all of which were governed by European law – showed that they were trying to make a point.

But despite a number of policies initiated to encourage growth among SMEs, some suggest the Budget still falls short for many businesses.

For example, there was no reintroduction of PAYE cap for SME tax credits, while the PAYE cap introduction has been delayed by 12 months until April 2020.

The statement also revealed no increase to the SME scheme. The increase to R&D investment, will likely benefit some large businesses, but considering the disproportionate number of R&D Expenditure Credit (RDEC) claimants, the majority of businesses won’t see any immediate benefit.

However, the government did announce a £3,000 cash grant for businesses, aimed at small businesses rate relief, as part of its key initiative in supporting businesses in times of low working capital. Though how this pans out is very much up in the air at the moment.

Budget 2020: The fallout for accountants (part 1)

The Chancellor’s annual Budget statement can bring equal amounts of excitement and dread for accountants, as policies announced often mean more work, though more income for those savvy enough to get on the ball.  This year seems like it will be a busier time than ever, so we’ve broken down the main talking points in a handy guide, as well as keeping you abreast of what regulation changes you need to be on top of at the moment.

Employment allowance rise

The Budget saw the maximum employment allowance increase by £1,000 to £4,000 from April 2020, but the government has held firm on plans to restrict the relief to employers with a NICs bill of under £100,000, to ensure the relief remains targeted at the smallest companies.

All businesses, charities and community amateur sports clubs eligible for the employment allowance, whose secondary class 1 National Insurance contributions (NICs) liability is over £3,000 a year, will be able to claim the larger reduction.

Earlier this year HMRC removed the requirement for employers to provide information about other de minimis state aid they have received or been allocated as part of their claim.

From 6 April 2020 employment allowance will be operated as de minimis state aid. It will be available to all employers who meet the secondary Class 1 NICs’ eligibility criteria, provided they have space in their relevant de minimis state aid limit(s) to accommodate the annual amount of the employment allowance, regardless of whether they would have that level of secondary Class 1 NIC liability.

Employers will not have to do anything extra to claim the additional allowance, which is expected to cost the Exchequer around £455m annually. Businesses and civil society organisations who already claim the allowance through their payroll software will automatically receive the increased allowance, provided they remain eligible.

Corporate Gains Tax on Residential Property

UK residents disposing of UK residential property could be in for a shock with a new requirement to calculate, report and pay any CGT liability with 30 days of completion.

The new rules significantly change the timing of CGT payments for UK resident individuals, trustees and personal representatives. They apply to disposals from 2020/21 onwards where a CGT liability arises on a sale or gift of land which includes a residential property.

To make these new ‘in-year’ reports, HMRC has built a new, stand-alone, CGT on UK Property Service. Agents can access this through their Agent Services Account (ASA) – but only after completing a digital handshake with the client to authorise them to act. Existing 64-8 authorisations will not be valid for this service.

To complete a digital handshake, the client will need to set up a Government Gateway account if they have not already got one, verify their identity online and then set up a CGT on UK Property account. This will generate a reference number which the client must give to their agent so that the agent can request authority to act through their ASA.

Getting your house in order

Those that deal with relevant accounts should already be aware of these provisions as they were included in Finance Act 2019 but getting the message to clients is going to be key. Many non-residents were caught out when similar rules were first introduced in April 2015, resulting in a number of penalty appeal cases reaching the First Tier Tribunal.

While some (but not all) of those late filing penalties were overturned on appeal – and HMRC stopped issuing daily penalties in non-resident cases – we cannot expect the tribunal to have the same sympathy for UK residents who might reasonably be expected to find it easier to keep up with changes to UK law.

Clients who do not have a CGT liability – for example, if full private residence relief applies – can be reassured that they don’t have to report in-year. Unlike non-residents, who must report all UK land disposals, UK residents only need to report if a payment on account of the CGT (calculated according to the special rules for in-year reporting) is required.

Entrepreneurs’ relief limit cut to £1m

Despite high hopes, the hugely controversial entrepreneurs’ relief will not be abolished, but will be reduced, from a £10m lifetime allowance to £1m. This will apply to qualifying disposals made on or after 11 March 2020 and to certain disposals made before 11 March 2020.

There are special provisions for disposals entered into before 11 March 2020 that have not been completed, and in relation to certain entrepreneurs’ relief elections following an exchange of shares for those in another company.

Entrepreneurs relief is used by a small number of business owners a year with an estimated 4,000 beneficiaries a year, who tend to use the tax relief as a retirement pot, rather than stimulating new start-ups. It costs the Exchequer an estimated £2.7bn a year to operate without stimulating start-up business.

The new legislation contains rules that counter certain forestalling arrangements that seek to ‘lock-in’ to the pre-Budget day lifetime limit. Those arrangements make use of:

  • unconditional contracts entered into before Budget day;
  • the time of disposal rule at section 28(1) of TCGA 1992; and
  • contractual completion of the disposal after Budget day.

There are no transitional rules for disposals that take place after 11 March 2020, including where:

  • the business ceased to trade prior to 11 March 2020;
  • the disposal is ‘associated’ with an earlier disposal; or
  • the gain is a deferred gain that accrues on a chargeable event on or after 11 March 2020.

For those this may affect, read the government’s Technical guidance on entrepreneurs’ relief changes.

International Women’s Day – celebrating women in accountancy #IWD2020

In honour of International Women’s Day, this week we’re shining the spotlight on some of the women and women’s movements who are making the profession more accessible, supportive and equal for women to succeed in.


Annually on 8 March, thousands of events are held throughout the world to inspire women and celebrate their economic, political and social achievements. International Women’s Day is an opportunity for organisations to share their commitment to championing the role of women, both in the accountancy profession and throughout the wider business world. Find out more about what ICAEW are doing here.

Women in Accountancy and Finance Awards

While the spotlight may be shone in March, May this year sees the Women in Accountancy and Finance Awards 2020: an awards programme that aims to promote diversity and tackle discrimination in the sector.

“While accountants in practice, plus their counterparts in business and the third sector, have looked to build a more diverse and meritocratic profession, there is still a long way to go,” says Incisive Media, the event organiser.

“Those who make it to the top are outstanding role models, but there are still far too few women leading practices or sitting on boards. These awards will honour the inspiring achievements of women across all parts of accountancy and will also help shape the discussion around how diversity can be improved within the sector.”

Kevin Reed, chair of judges for the Women in Accountancy and Finance Awards, says: “The accountancy profession hasn’t shied away from broaching equal opportunities and diversity, but more progress is required.

“These awards will hopefully play a part in raising the profile of the crucial role women play, and highlight the hurdles that many people face in progressing within the profession.”

The awards will take place at the Hilton Bankside, London, on Wednesday, May 6 2020.

But is it time for celebration?

In recent years the profession has made big strides towards gender equality. According to figures from the seven main professional bodies within accountancy (ACA, ACCA, CAI, CIPFA, CIMA, ICAEW, ICAS), over the past two decades the number of female students enrolled across all bodies has increased. By 2017, 49% of students at the seven combined bodies were female.

Some bodies are actually disproportionately female. ACCA reported that 57% of its currently enrolled students are female. Given that these students will form the next generation of accountants, this bodes well for gender equality in the future.

2019 marked the centenary of the passing of the Sex Disqualification (Removal) Act of 1919, when women could not join professional accounting bodies because of their gender. Now, they’re beginning to reach numerical parity.

Despite such progress, the same old obstacles remain. A 2016 report by the ICAEW surveyed female accountants to find out more about their perceptions of the profession. Most of the women questioned (57%) admitted to seeing accountancy as a male-dominated field.

The report also uncovered concerns about childcare and maternity leave, indicating that accountancy hasn’t yet done enough to help women progress in their careers without compromising on their families.

As one of the ICAEW report’s participants explains, “If I were to see more women partners and women higher up, it would make me think I can do that as well, rather than mainly seeing men in those roles.” It seems, then, like an apt time to celebrate the female leaders in accountancy,

Why women mean business

Gender diversity in the workplace is fundamental to business success. Research has shown that companies with more women in leadership positions are more profitable and more efficient. Additionally, the Equalities Act 2010 means the issue of recruiting and retaining female financial talent is more pertinent than ever.

Skilled finance professionals remain in high demand and the competition for them is intensifying both on a national and global scale. In the UK and across the EU, women represent a large slice of this talent pool. They are becoming central to meeting the combined challenges of an ageing workforce, falling birth rates and a skills shortage.

Support for female trainee accountants

ICAEW claims to equip female ACAs with the skills and knowledge they need to thrive in the industry. They can show you how your salary compares with industry averages through their annual career benchmarking survey, while they also run a Women in Leadership programme, which grooms mid to senior level women for board level, senior management or director/partner positions. It provides solid leadership training with additional elements that focus on the needs of women specifically.

We look forward to seeing more equality throughout the profession, and encourage you to take steps in your own professional spheres to help make this a reality.