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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.

Responsibility

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.

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!

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:

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.

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?

Double-dipping

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.

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 11^th 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 gov.uk 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.

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.

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.

We’re talking about mental health again this month, and this time how to manage mental health in the workplace, in particular how to look out for others who may be having a difficult time.

Talk without talking

Rightly or wrongly, the British are often known for being polite, not wanting to cause a scene, and not knowing how to talk about something head-on. We can dance around the subject and never get to the point, or just keep a ‘stiff upper lip’ and not say anything at all. We feel you. So how do you start that conversation with someone who you can tell is suffering, when the thought of actually talking to them about it is bringing you out in cold sweats?

A simple gesture is often enough to get started – offering a cup of tea, a cigarette, a bite to eat, a walk around the block. Once you’re both in a safe space away from curious ears, conversation may well start to flow. But even if it doesn’t this time – the gesture you’ve made in showing you’re prepared to listen will mean more to the other person than you’ll think.

Openness

The most important thing you can do is just be open and responsive to colleagues if they need to talk. And that doesn’t mean you need to stand up and make a big announcement in front of everyone or send a company-wide email (though feel free if that’s what you want to do).

You might add something in your email signature, or have a small sign on your desk. You could wear a badge, or use a mug with a welcoming message on it. You could smile at your colleagues and ask them how they are in the morning. It all helps.

Then just be prepared to listen if someone does ever approach you. You might not know how much courage they are using to take that first step.

I’m out of my depth!

Not everyone knows much about the different kinds of mental health issue that people can be affected by, and fewer still know how to support those suffering from them. That’s fine. Sometimes being a sympathetic ear is all that is needed.

Your colleagues may wish to vent about something that you might be in a unique position to understand. They may express frustrations, or admit difficulties they are having. Take the time to ask open questions so they are able to tell you more, and help them if they are unsure of themselves. They might need some reassurance, they might need advice, they might just need you to be there.

Throughout the course of the conversation, it may become obvious that the person you’re speaking to needs more help than you’re able to give, in which case freely explain this to them, and offer to call someone – be it a helpline, another colleague, or even the emergency services. Don’t feel like you need to be a hero or struggle on your own, remember to think of yourself too!

Resources

If you’re keen on being a supportive colleague, mental health first aid training is becoming more popular, and many organisations now hold in-house training, or smaller companies may support you in receiving this training elsewhere. And many of the techniques taught can be useful outside of work as well. Ask if your employer offers this, or would be happy for you to find out more. St John Ambulance is a good place to start, with a wide variety of mental health first aid courses available.

Posters, cards and online messages can also be helpful in your immediate circumstances to let people know you’re happy to listen. Try downloading sample #inyourcorner resources or making your own here.

Why not have a chat with your manager or HR department about promoting mental health throughout your organisation. Read our blog from last month to see what other companies are doing to promote healthier working.

Over the years we’ve seen many, many changes in the reporting that companies are required to publish, and we enjoy teaching the next generation of accountants what these are, so they can lead from the front in their respective roles. A new shake-up, currently being mooted by the FRC, concerns how companies and auditors assess and report on the impact of climate change, which we think is very timely.

The review is primarily concerned with how the quality of information can be improved to support informed decision-making by investors and other stakeholders.

What is the FRC looking for?

The FRC plans to monitor how companies and their advisers fulfil their responsibilities, and seek to encourage better practice.

A sample of company reports and accounts across industries will be reviewed to assess the quality of their compliance with reporting requirements in relation to climate change. A sample of audits will also be analysed to see how auditors are ensuring the impact of climate risk has been appropriately reflected in company reports and accounts, including the key areas of judgement and related disclosures.

In addition, the FRC will assess the resources available within audit firms to support the evaluation of the impact of climate change on audited entities.

Focus on Quality

The regulator says it will be evaluating the quality of disclosures under the new UK corporate governance code regarding risk, emerging risk and long-term factors affecting their viability.

It will also look at whether the financial reporting lab’s recommendation for companies to report in line with the task force on climate-related financial disclosures framework has been adopted, highlighting developing good practice.

Sir Jon Thompson, FRC CEO said: “Not only do boards of UK companies have a responsibility to report their impact on the environment and the risks of climate change to their business, but investors expect them to operate sustainably. Auditors have a responsibility to properly challenge management to assess and report the impact of climate change on their business.”

Environmental disclosure analysis

The Alliance for Corporate Transparency, a collaborative initiative launched by public interest law organisation Frank Bold, has analysed the information that companies disclosed on their environmental and societal risks and impacts following the requirements introduced by the EU Non-Financial Reporting Directive.

Its report analysed 1,000 companies across Europe and found that poor quality and comparability of corporate disclosures are hindering efforts to scale up sustainable finance, as investors do not have reliable information to inform their decisions.

Companies tend to focus on presenting general policies and commitments for key issues such as climate, human rights, and anti-corruption, but not concrete targets, outcomes of policies with respect to these targets.

Only 22% of companies provide their key performance indicators in summarised statements, while just 13.9% of companies report on alignment of their climate targets with the Paris agreement goals.

While this number is higher in the energy and resource extraction sector (23.5%), this still means more than three quarters of companies do not report on their targets and plans in this context.

A quarter (23.4%) of companies provide specific information that allows readers to understand the climate-related risks they are facing – out of 53.8% reporting that they recognise the existence of such risks. 13.4% of financial companies provide details on the exposure of their portfolios to the most polluting sectors.

The research found little difference between different European regions, with the exception that companies from former Eastern Europe lag behind, and Nordic companies tend to be among the regions that report more specific information than others.

Filip Gregor, head of responsible companies at Frank Bold, said: ‘The results of the research show that existing legislation is not meeting its objectives and it seems that the only way to address the problem is to specify what companies should be reporting.

Back in September we started looking at the British Values and their relevance to business today, especially when it comes to ethics. So a story that caught our eye this week concerned the House of Lords and the increased daily allowance for peers. Is this an example of our democracy flourishing?

Naturally, concerns have been raised over the increase in daily allowance for members of the House of Lords after it was revealed that peers could earn in one day what some Universal Credit claimants receive in a single month.

From April, peers will get a tax-free payment of £323 a day for attendance in the chamber, up from the current rate of £313.

The 3.1 per cent increase is above the rate of inflation and means the daily sum for peers will exceed the monthly standard allowance for a single person on Universal Credit.Top of FormBottom of Form Prime Minister Boris Johnson suggested he did not agree with the pay rise but said it was a decision for members of the House of Lords.

Members of the Lords do not receive a salary for their parliamentary duties but can claim an attendance allowance, if they wish. Some members such as Government ministers and the Lord Speaker do receive a salary.

A spokesperson for the House of Lords said: “Between 2010 and 2018 the daily allowance for members of the House of Lords was frozen. In April 2018 it was agreed to link increases to the daily allowance to the figure used by IPSA for increasing the salaries of MPs, which itself is linked to public sector pay awards.

‘Voters will not be pleased’

The Electoral Reform Society has criticised the pay rise for peers, which means members will receive an annual tax-free income of more than £48,000.

“Voters will not be pleased with unelected peers getting yet another surge in expenses, while most people will barely see a pay rise in 2020 at all,” said Willie Sullivan, senior director of campaigns.

“The current system is ripe for exploitation, with peers having to do little more than sign in to claim their tax-free allowance. The fact that voters cannot hold them to account at the ballot box is a recipe for wanton disregard for taxpayers, and yet more expenses scandals in Parliament’s de facto private members’ club.”

How to become a peer in the House of Lords

The 1999 House of Lords Act ended the right of hereditary peers to pass membership down through the family and introduced the House of Lords Appointments Commission, explains Parliament.co.uk:

“Set up in May 2000, this independent, public body recommends individuals for appointment as non-party-political life peers and vets nominations for life peers to ensure the highest standards of propriety,” says the site.

There are several different routes into the House of Lords. For example, dissolution honours take place at the end of a parliament, when parties can give peerages to MPs who are leaving the Commons. Resigning prime ministers can also recommend peerages. A few familiar faces from the previous parliament are likely to become Lords in the near future.

The Archbishops of Canterbury and York usually get life peerages on retirement, although the number of bishops in the House of Lords has been limited to 26 since the mid-nineteenth century. From time to time, a list of working peers will also be announced from the three main parties.

So while Lords members are vetted and generally agreed on by parliament, critics of the Lords believe it should be scrapped and replaced with a directly elected second chamber. Watch this space for more news, including an update on rumours that the Lords might move to Yorkshire…