Budget 2021

The SFA 202 Budget statement was featured on Fleet Transport.

MentorsWork & Government Supports

SFA Director Sven Spollen-Behrens was interviewed on Northern Sound, Cavan & Monahan Radio, on 21 October to talk about Level 5 restrictions, government supports and MentorsWork.

Champion Green

Champion Green and SFA Director Sven were featured in the Leitrim Observer and the Meath Chronicle discussing why it is so important to support local.

Regardless of whether the UK and the EU agree to the terms of a trade deal, the UK will leave the EU VAT area on 31 December 2020. This has the potential to create real difficulties for Irish companies in terms of VAT cash flow and increased administration by operating within the EU VAT area and the UK VAT area from 1 January 2021 onwards.

Trade with the UK

From 1 January 2021, sales of goods from Ireland to the UK should be treated as Irish exports with no Irish VAT chargeable. Similarly, the sale of goods from the UK to Ireland should be treated as UK exports with no VAT chargeable.

Import VAT will arise on the importation of goods into Ireland from the UK. The Irish Government has stated that it will introduce postponed VAT accounting on all imports in the event of a no-deal Brexit. It remains to be confirmed if Ireland will still implement postponed VAT accounting on imports where a trade deal is reached between the EU and the UK. Postponed VAT accounting for imports would avoid the requirement for businesses to pay import VAT at point of import and subsequently recover it, resulting in a significant VAT cash flow benefit for businesses.

A similar position will apply in respect of imports of goods into the UK from Ireland, and UK import VAT will arise at point of import. The UK has announced that is also intends to introduce postponed VAT accounting for imports from EU and non-EU countries into the UK from 1 January 2021.

Furthermore, importing goods followed by a domestic supply may require Irish and UK businesses to obtain UK and Irish VAT registrations to account for VAT on any domestic supplies being made post import (typically DDP supplies). This may result in Irish and UK business operating both an Irish and a UK VAT registration.

It should be noted that the VAT steps outlined above will continue to apply if a trade deal is reached between the EU and the UK.

Trade with NI  

Under the agreed Northern Ireland Protocol, NI will remain part of the UK VAT area but the EU VAT rules in respect of goods will continue to apply in Northern Ireland. Therefore, from 1 January 2021, the current VAT treatment should continue to apply to trade in goods between Ireland and NI. This will mean that businesses can continue to treat the supplies of goods to NI as zero-rated intra-EU supplies.  

Certain operational aspects of the arrangements will need to be considered further, however; the EU is proposing to amend current law to introduce a special VAT identification for NI businesses. It should also be noted, however, that the UK can adjust VAT rates in NI in respect of goods. Accordingly, the UK, could reduce rates of VAT or even apply VAT exemptions to goods sold in NI. How this would apply in practice remains to be clarified.  

Action Points

Businesses should continue to review their supply chain and understand the potential VAT obligations that may arise from 1 January 2021. This may require businesses to operate within the EU VAT regime and the UK VAT regime. This may also create a significant cashflow (absent postponed VAT accounting measures) and an administrative burden on businesses by way of an additional VAT registration which may give rise to changes in their business model, IT, accounting systems and processes.  

Written by Fionn Uibh Eachach, Partner, Indirect Tax at BDO. To watch back our recent Brexit webinar with BDO click here and if you have any questions on this or other Brexit matters contact Elizabeth Bowen, SFA Senior Executive, elizabeth.bowen@sfa.ie.

Budget 2021 has several implications for employers and in this article, we take you through the following: 

• Parent’s Benefit increases to 5 weeks for parents of children born or adopted from November 2019 –an increase of 3 weeks 
• The number of ‘waiting days’ for Illness Benefit will reduce from 6 days to 3 days for all new claims from the end of February 2021 
• The planned increase in pension age to 67 was postponed 

Parent’s Benefit  
This leave is granted to both parents to allow them time off around the birth or adoption of their child or the child of their spouse or partner. The Parent's  Benefit is paid for by the Department of Employment Affairs and Social Protection and there is no legal obligation for employers to provide a top up payment. The leave must be taken within 52 weeks of the birth/adoption of the child. However, from April 2021 the entitlement will increase from 2 weeks to 5 weeks and employees will have up to 104 weeks to take this leave. Eligible employees can avail of their 2 weeks until April 2021, where they can then claim their remaining 3 weeks entitlement. Considering this, businesses should prepare for and expect more requests from parents seeking time off for childcare commitments next year.

Illness Benefit  
Currently, under Irish employment law, an employer has no obligation to pay staff who are on sick leave. Generally, if a company does not provide sick pay, an employee can avail of the Illness Benefit from the 7th day of absence. As part of this year’s Budget, employees will, from February 2021 be able to avail of illness benefit from the 4th day of absence. Essentially, the number of waiting days will reduce from 6 to 3 on new claims. 

Pension Age  
The state pension age will remain at 66 as announced in this year’s Budget, despite originally planning to increase the qualifying age to 67 next year and 68 in 2028. A Commission on Pensions has been set up to review future changes to the pension age and is due to report by June of next year.   

View here to see the SFA's response to Budget 2021. If you have any questions on the above, please contact Emma Crowley, SFA HR Executive. 

While Covid-19 is presenting significant challenges for business, Brexit will fundamentally change the terms on which trade is undertaken between the UK and Ireland. Since the vote in 2016, the SFA has promoted Brexit readiness to members by providing information on customs, finance, supply chains and VAT. As we get closer to the end of the transition period, we now focus on how small firms can prepare and support their workforce in advance of 1 January 2021.

Introducing Flexibility
Properly preparing for Brexit means ensuring your business is customs ready. Unfortunately deal or no-deal delays at our ports after the 1st January may be a possibility and should be planned for.

In advance, employers should consider preparing for possible changes to working hours and rotas. Changing employee contractual working hours or days may be required for the business to handle the late arrival of goods to businesses in early January. Any change to an employee’s contract of employment requires consultation with the employee and his/her written consent. Staff impacted may range from office administrators to transport or supply chain personnel.  

In the context of requiring staff to work additional hours, regard should be had to any existing Overtime Policy. From a Health and Safety perspective, employers need to consider the provisions of the Organisation of Working Time Act 1997, to ensure that staff avail of required rest breaks and that there is no breach of the legislation.  

Where the recruitment of additional staff for specified project/s or timeframe is necessary, the use of Fixed Term contracts is recommended. Employers should refer to the Protection of Employees (Fixed Term Work) Act 2003 when drawing up this type of contract.

UK Citizens working in Ireland 
Under the Common Travel Area UK citizens can enter Ireland without a visa, travel between the UK and Ireland and work without an employment permit along with other rights and entitlements. The Common Travel Area is separate from EU law and will continue to apply after 31 January 2021. The only recommendation for UK citizens is from the National Driver Licencing Service who ask that UK driver licences are exchanged for Irish licences before the end of 2020.

Rights of EU citizens in the UK after Brexit
EU citizens who have lived in the UK for more than 5 years can apply to the UK government for settled status. This status gives people the right to continue living, working, building up a state pension and using public services in the UK, as they do now. 

It is not yet known what the requirements will be for EU citizens who want to go to live and work in the UK after the transition period. That will depend on the agreements that the EU and the UK make on their future relationship.  
See UK citizens advice for more information. 

Regulated Professions 

The EU commission have prepared a notice for stakeholders regarding readiness’ in relation to regulated professions and the recognition of professional qualifications. Further updates will be issued where necessary. 

Cost Savings  
2021 Could be a very challenging year for small firms and there may be a need to revise head count. As a first step employers may consider scaling down on agency and temporary workers or reducing overtime or certain benefits. Implementing employee lay-offs and introducing short-time working may also need to be contemplated. Importantly, employers must be cognisant of employment contracts and consult with employees to ensure such provisions can be introduced.  

An employee working reduced hours while on short time will continue to accrue annual leave for the hours worked, while employees laid off will not accrue any leave. Employers may be required to re-calculate an employee’s entitlement for the remainder of the year. See link for more information on annual leave calculations  

Review contract 
There is a concern that business competitors in the UK market may seek to relocate to Ireland and recruit key staff members. As a result, Irish-based employers should review or introduce contract provisions such as: confidentiality, intellectual property, non-compete and exclusivity of service, to safeguard, insofar as possible, critical company data/information. If these provisions do not currently exist, they can only be introduced by way of amendment to contracts. Employers must consult and obtain consent of the individual before any such amendment is done.  

To best prepare your staff for the impact of Brexit business owners and managers should communicate regularly with staff to give reassurance and up to date information on how the company is getting ready for this significant transition.  

Members are advised to consult with the Brexit Readiness Checklist to ensure key actions are taken to get ready for the changes Brexit will bring from 1 January 2021.   

Earlier this month, the Small Firms Association released its Small Business Sentiment Survey report. The survey was conducted in August 2020 amongst members of the Small Firms Association.  

The most significant trends are as follows:  

• One third (33%) of small business owners stated that the business environment is declining compared to 17% in Winter 2019.  
• Risk factors identified were ongoing covid-19 restrictions, debt and business cost increases.  
• Domestic economic growth continues to be the primary driver of business opportunities.   
• Half of respondents said their businesses are growing.   
• Over two-thirds plan to invest in the next 12 months. 
• Most survey respondents intend to keep wages at their current levels or to award pay rises where the business performance allows. 

Thank you as always to those members who completed the survey.   

We encourage you to access both the press statement and a pdf copy of the Small Business Sentiment Survey.  

Please contact elizabeth.bowen@sfa.ie to discuss any aspect in greater detail or to request  

Last week, the Expert Group on Future Skills Needs published their Leading the Way Report which focuses on Management Development for SME Productivity and Growth in Ireland. The SFA was actively involved in the creation of this report and the 7 key findings are set out below: 

1. Attitudes to management development and making it a priority  

Managers recognise management and leadership development as a top priority, in particular for their management teams, if less so for themselves. However, the commitment of resources lags behind, with fewer than half of the firms surveyed for this study reporting a dedicated budget for management development. Time is identified as the biggest barrier to training; but negative perceptions and concerns about relevance have also been found to be important.  

2. Valuing formal approaches to management development  

SMEs report a high reliance on informal manager learning and strategising practices, especially in smaller firms. However, formal learning and strategising are linked with better outcomes for firms. In this study, firms with better innovation outcomes and better management scores were found to conduct more formal training and to use more formal approaches to strategising.  

3.  The importance of learning from external sources  

Better outcomes for the business are also associated with the use of more external data and networking opportunities. In smaller businesses, knowledge transfer is more likely to be concentrated inside the firm. When done well, this can lead to organisational learning. However, more radical innovation normally requires a broader base of knowledge sources – including customers, suppliers and networks, for example. Smaller firms also rely less on data from these external sources to underpin decision making.  

4.  Deriving value from available training opportunities  

The study has identified a large capacity for delivering management-related training and development in Ireland. However, there is some concern that SMEs are not fully exploiting this resource as they could. One reason, given by many, is that they find the training offer confusing and not sufficiently coherent. This points to a need to join up the offer at an operational level so that synergies can be realised and the training that is available is more accessible. 

5.  The centrality of HRM and talent management  

Hiring the right people and promoting the right people to the right roles is critical to successful growth. An owner that can rely on and trust the management team to do their job can focus attention towards more strategic activities. The study shows a need for improvement in HRM practices concerning dealing with underperformance and hiring practices. Also, not unrelated, is the weakness in performance monitoring that can lead to a failure to recognise or deal with underperformance in a timely manner. Although very small firms may not have a dedicated HR manager, learning and adopting good practices for managing people improves engagement, job satisfaction and ultimately return on investment.  

6.  Using available data to improve productivity  

Survey respondents in general feel confident about their digital literacy, but further questioning on this suggests that this is within the context of standard communication tools such as email or social media. Most firms do not use advanced analytics and data monitoring to assist in decision making. However, firms that did report high intensity in the use of data and advanced analytics also demonstrated significantly better management practice scores and also improvements in innovation and innovation outcomes. This finding compliments other international studies suggesting that data driven decision making (DDD) improves productivity outcomes. Maintaining momentum and following through on programmes of improvement was also recognised as an issue, showing that it is not enough to do management training. This must be monitored and maintained to support a culture of continuous improvement within management teams.  

7.  A focus on resilience, growth and internationalisation  

As firms grow and reach different stages in their development their management development needs will change. Implementation plans therefore need to be cognisant of variations across firm size. The timing of this study during Covid 19 also brings resilience to the centre. Resilience is important for SMEs, in particular Irish SMEs that are more exposed in a globally outward-looking economy. Despite such a global outlook, exporting and the international presence of Irish SMEs is weak relative to other countries. The findings do indicate however that many companies that are not currently internationalising are interested in exporting, and supports need to help them realise such ambitions. 

The full report can be downloaded here. 

The SFA in partnership with Skillnet Ireland, has launched a new phase of the MentorsWork initiative aimed at guiding Irish SMEs through their current business challenges towards stabilisation and recovery, six months on from the outbreak of Covid-19.  MentorsWork is also supported by the Strategic Banking Corporation of Ireland (SBCI) and Microfinance Ireland.

The MentorsWork eight-week business support programme is free to SMEs nationwide and is designed to provide the skills and supports to help business owner-managers sustain and improve their business. The programme offers integrated learning supports across four key pillars; People, Finance and Growth, Digitalisation and Automation and Business Processes, all which help businesses to adapt and thrive by improving skills and competencies.

MentorsWork will connect business owners and managers across Ireland with experienced and skilled business mentors to address specific business issues on a one-to-one basis. The programme also offers specialist masterclasses and access to a bespoke online learning platform specially designed for SMEs.

With up to 300 places available in this new phase of the scheme, the MentorsWork initiative is open to SME business owners and leaders operating across Ireland and in all sectors of the economy. The programme is free of charge and open to private sector businesses that employ between 5-250 people.

Business owners and managers can apply to participate in MentorsWork here.

Our economy is experiencing a profound shock. The ongoing effects of the COVID-19 pandemic are tragic and seismic. The necessary actions taken to contain the health emergency have affected all of our lives and livelihoods. The effect on the incomes of many households and businesses have been profound, with many experiencing the stress and hardships of this pandemic. The Central Bank is focused on doing all that it can, across all of its mandate, to minimise the effects of this economic shock.

In our webinar Deputy Governor of the Central Bank Ed Sibley will talk about the importance of SME access to finance, engaging with the banks in relation to distressed debt and if the system wide support for small business borrowers is sufficient. After his opening remarks Ed will be joined by a panel of small business finance experts including the SFA Chair Graham Byrne.

Click here to register

Compliance with the data protection rules and their transparent application creates trust between businesses and consumers when it comes to the use of their personal data. This webinar will recap on the application of the General Data Protection Regulation 24 months since it was introduced and update members on how to remain GDPR compliant.

In November, Deputy Commissioner Graham Doyle and Elaine Edwards, Special Investigations Unit of the Data Protection Commission will join us on a webinar to recap on the General Data Protection Regulation 24 months on. This webinar will focus on:

• Complaints
• Data Breaches
• Accountability – the controller and processor relationship
• Transparency requirements
• Third country data transfers
• Consent
• New guidance – cookies and other tracking technologies
• Steps small firms can take to remain compliant

For small business owners and Data Protection Officers, this event is not to be missed.
Register for this webinar here.

Details to be announced shortly - register now for the SFA AGM on 25 November, 18.00-19.00