The higher education sector is grappling with empty campuses, online learning and in many cases, delayed or halted research projects, but these aren't the only issues the industry has to contend with. Carol Rudge summarises the situation in our new sector update report.
Before the pandemic arrived, the higher education sector was already facing a number of uncertainties arising from the impact of climate change, Brexit, the Augar review, and the challenges of implementing additional regulatory and financial reporting requirements.
In recent months, all focus has been directed to dealing with the impact of COVID-19, which has had a dramatic affect on the higher education sector, and is expected to do so for the foreseeable future.
Read our report for a full run-down of how COVID-19 and other challenges will affect the higher education sector [ 1140 kb ]
The impact of COVID-19 on the higher education sector
Undoubtedly, while the financial reporting impact may not be at the top of many board-meeting agendas, there are many accounting ramifications of the current circumstances that all higher education institutions need to carefully think about as they prepare their 2020 financial statements.
We have included a summary of these in this report, but due to the significance of the current pandemic and the level of impact it is having, we have produced a separate report on the key challenges of COVID-19 in relation to the sector, along with the potential financial reporting and regulatory impact.
Addressing climate-related issues for higher education
With increasing reporting requirements for those entities incorporated under the Companies Act, there is additional onus to address climate-related issues, with specific measurements required to be reported under the Streamlined Energy Carbon Reporting regulations and an overall assessment of the entity’s impact on the environment as required by The Companies (Miscellaneous Reporting) Regulations 2018.
Although these requirements are not mandatory for all higher education institutions, many stakeholders will be looking towards the sector to provide concrete action and direction on climate change and, therefore, we expect reporting in this area to increase significantly, whether required by legislation or through best-practice reporting.
With regards to Brexit...
The impact of leaving the EU is still unclear, and therefore it is advisable that higher education institutions continue with their contingency planning, both in the short- and long-term; with a particular focus on the potential impact Brexit may have on funding, especially research grants, students, employees and other key stakeholders.
Updated OfS Accounts Direction
All these challenges are accompanied by the changes in financial reporting with the new Statement of Recommended Practice (SORP) and updated OfS Accounts Direction being effective for 31 July 2020 year ends. We do not expect the changes from the SORP to have a significant impact for most institutions, however, the OfS Accounts Direction includes some significant additional disclosure requirements, which are likely to be relevant to most institutions.
Tax- and VAT-related developments
There have also been several tax and VAT related developments affecting the sector. New EU mandatory disclosure requirements, commonly known as DAC6, have recently been introduced, which could impact higher education institutions that have overseas transactions. The VAT zero rating for e-publications has been brought forward to 1 May, which will represent a huge saving for the sector and there is still the potential historic opportunity. Our report also covers considerations around Making Tax Digital, IR35 and the national minimum wage.
There is plenty for the higher education sector to navigate over the coming year. We hope that our sector developments publication, together with our COVID-19 report will give you some effective tools to tackle your financial reporting preparations during this difficult time.
Read our report for an overview of all the current issues impacting the higher education sector [ 1140 kb ]
For more information, get in touch with Carol Rudge.