News Archive for March, 2012

Budget Summary 2012 Business Breakdown

The Chancellor’s Budget this year was set in the context of mixed economic data and business confidence reports also giving mixed signals. The economy continues its sluggish course, aided by a softening of the emergency klaxon sounding over the Euro…although for how long remains to be seen…allowing the Chancellor to lead off with a discussion of the problems the Euro crisis imposes on the UK economy. With uncertainty abounding, the Budget was never going to be radical and was always destined to be something of a box of bits.

Although careful leaking of some of the major measures ensured that surprises were few and discussion dominated beforehand by the political controversy surrounding the 50p tax rate, the devil (and interesting bits) are, as always in the detail. 

Before you undertake any tax planning or mitigation exercise, take professional advice.

Summary of Changes Affecting Business Clients

Tax Avoidance and Evasion
The Chancellor sais that ‘tax evasion and aggressive tax avoidance are morally repugnant’ and has clearly set his stall to limit both, to the extent of giving HMRC officers generally the search and seizure rights which used to be reserved for those on the ‘Customs and Excise’ side of HMRC.

The Overview of Tax Legislation and Rates was replete with anti-avoidance legislation in advance of the introduction of General Anti-Avoidance Rules (GAAR) which are scheduled for 2013. Several detailed anti-avoidance measures, especially relating to avoidance schemes making use of capital allowances.

Clearly worried that a Budget measure had been leaked, the Government announced yesterday that with immediate effect it was taking measures to prevent two schemes one involving property losses where there are agricultural connections and the other involving the misuse of post cessation relief.

Also, the Disclosure of Tax Avoidance Schemes regulations are to be beefed up. A consultation is being launched to extend the ‘hallmarks’ which set out when such schemes must be notified to HMRC to capture scheme not currently required to be notified and from 2013 the identities of dishonest tax agents will be subject to publication as well as penalties being levied.

Corporation Tax (CT)
The Chancellor’s long-term intention is to harmonise tax rates for companies and individuals. For many individuals this will remove the tax benefit of operating as a company.

The corporation tax rate is being cut from 1 April to 24 per cent, with further reductions in corporation tax of 1 per cent in 2013 and 1 per cent% in 2014 (to 22%). The Bank Levy is being increased to stop them from benefitting from the general corporation tax reduction.


Employee Management Incentive (EMI) Share Schemes
The limit on the value of shares over which options may be held by an employee under EMI will be increased from £120,000 to £250,000. This will be introduced ‘as soon as possible’.

Small Business Tax
The Chancellor has initiated a consultation to create a ‘radical tax simplification’ for very small businesses (those with turnover of up to £77,000) by which they will be taxed, it seems, on turnover and no longer need to submit accounts.

Tax Relief Exploitation
The Government will introduce a limit on all uncapped income tax reliefs. For anyone seeking to claim more than £50,000 of reliefs, a cap will be set at 25 per cent of income. This will not be extended to those reliefs that are already capped, as to do so would reduce the amount of support the tax system gives, for example, to enterprise and pension contributions. This will apply from April 2013.

Company Cars
Company cars are set to lead to yet higher assessable benefits in kind, with increases being introduced for higher-emission cars (almost all cars) and to the percentage of the list price that is taxed. The differential for diesel cars is being abolished so a company car becomes more expensive, but petrol relatively more so. The car tax changes mean that the average user of a company car will pay around an extra £700 in tax over the next 3 years for a petrol car, and £500 for a diesel car.

Enterprise Investment Scheme and Venture Capital Trusts: increases to thresholds – The EIS annual investment limit for individuals will be increased to £5 million from 6 April 2012. ‘Business Angels’ are the likely beneficiaries of this change.

Landfill tax
The standard rate increased to £72 per tonne (increase of 11%) form 1 April. Empty your skip fast!

Boosts for Business
A number of changes (mainly small) to the capital allowances regime have been announced. Some are designed to stimulate investment and some to limit abuses of the current system. The ‘patent box’ regime has also been enhanced.

VAT
Rental of hairdresser’s chairs will always be a taxable supply.

Hot takeaway food will include all food that is above ambient room temperature when sold. This comes in on 1 October 2012.

Sales and alterations to listed buildings.
Alterations will become subject to VAT at the standard rate. Sales of a protected building will only be zero-rated when it has been reconstructed fro a shell.

 

If any of the items in this bulletin apply to you, please get in touch. The end of the tax year is 5 April for individuals and 31 March for companies.

Posted by Peter Nicholas on Thursday, March 22, 2012 at 10:16 AM

Budget Summary 2012 – Private Client 21 March 2012

The Chancellor’s Budget this year was set in the context of mixed economic data and business confidence reports. The economy continues its sluggish course, aided by a softening of the emergency klaxon sounding over the Euro…although for how long remains to be seen. With uncertainty abounding, the Budget was never going to be radical and was always destined to be something of a box of bits. The Chancellor confirmed his intention to follow his current path of deficit reduction by cutting both government expenditure and taxation.

Although careful leaking of some of the major measures ensured that surprises were few and discussion beforehand was dominated by the political controversy surrounding the 50p tax rate, the devil (and interesting bits) are, as always, in the detail.

Having stated that tax evasion and aggressive tax avoidance are ‘morally repugnant’, it was no surprise that the technical bulletins accompanying the Budget were replete with anti-avoidance proposals. A ‘General Anti-Avoidance Rule’ (GAAR) is set to be introduced in 2013.

Before you undertake any tax planning or mitigation exercise, take professional advice.


Anti-Avoidance
Expensive properties
The ‘mansion tax’ applicable to expensive properties held in offshore companies was extensively leaked in advance, but punitive Inheritance Tax (IHT) and Capital Gains Tax measures are also on the way, as is an ‘annual charge’.

Avoidance Schemes Closed
Clearly worried that a Budget measure had been leaked, the Government announced yesterday that, with immediate effect, it was taking measures to prevent two schemes, one involving property losses where there are agricultural connections and the other involving the misuse of post-cessation relief.

Disclosure of Tax Avoidance Schemes
A consultation is being launched to extend the ‘hallmarks’ which set out when tax avoidance schemes must be notified to HM Revenue and Customs (HMRC). From 2013, the identities of dishonest tax agents will be subject to publication, as well as penalties being levied.


Summary of Changes Affecting Private Individuals

Child Benefit
This will be earnings-related, being removed entirely for incomes above £60,000.

Personal Allowance
This will rise to £9,205 for the 2013/14 tax year, an increase of £1,100 compared with 2012/13.

After 6 April 2013, age-related personal allowances will be (in effect) abolished over time for persons not already in receipt of the allowance: it will subsequently be ‘aligned with the personal allowance’.

Basic and Second State Pension
A ‘single tier’ state pension is to be set, based on contributions. This will be set at basic rate with additions based on contributions (and at the whim of the Government). A consultation is due to start this spring.

Non-Doms
The existing tax system is to be reformed in 2013. Current HMRC guidance applies until then and the payment by non-doms to use the remittance basis for the 2012/13 tax year remains as announced in the 2011 Budget.

Tax Relief Exploitation
The Government will introduce a limit on all ‘uncapped income tax reliefs’, so that no-one will be able to claim more than £50,000 of reliefs, or 25 per cent of income if this is less. This will not be extended to those reliefs that are already capped, as to do so would reduce the amount of support the tax system gives, for example, to enterprise and pension contributions.

Enterprise Investment Scheme (EIS) and Venture Capital Trusts: Increases to Thresholds
The EIS annual investment limit for individuals will be increased to £5 million from 6 April 2012. ‘Business angels’ are the likely beneficiaries of this change.

VAT on Listed Buildings
The exemption from a charge to VAT for alterations to listed buildings is to be abolished, adding 20 per cent to the cost of such alterations.

Company Vehicles
The multiplier is being increased from £18,800 to £20,200, and the percentage of the list price that is taxed is also increased. The differential for diesel cars is being abolished so a company car becomes more expensive, but one running on petrol relatively more so.

Trading Through a Company
If you earn your living by trading through a company, you may have a shock in store. The Government is introducing a package of measures to tighten up on avoidance through the use of personal service companies. It is consulting on proposals which would require office holders/controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source.

Holiday Caravans
Sales of static holiday caravans not designed for year-round occupation will be taxable at the standard rate of VAT from 1 October 2012.

IHT
There is to be a clampdown on IHT avoidance through the use of offshore trusts by non-domiciled individuals. The changes will ensure that any reduction in the value of a person’s estate as a result of the arrangements is charged to IHT.


If any of the items in this bulletin apply to you, please get in touch. The end of the tax year is 5 April for individuals and 31 March for companies.

 

The information contained in this newsletter is intended for general guidance only. It provides useful information in a concise form and is not a substitute for obtaining professional advice

Posted by Peter Nicholas on Thursday, March 22, 2012 at 10:03 AM

Changes to Unfair Dismissal

On April 6th 2012 the qualifying period for unfair dismissal rises from one to two years.

How does this affect existing employees with the planned change?

The Government has now indicated subject to parliamentary approval the new two year qualifying period will only apply to those individuals hired on or after April 6th 2012.

Those already in employment before this date will retain their existing rights.

Therefore employers will not feel the positive impact of this change until at least April 2013.
If you feel you may need advice, DPA’s business and employment department can help you on the latest law in this field. Call Christian Houston or Mike Davey on 01554 749144 for further information, or contact Christian by e-mail at c.houston@daviesparsonssolicitors.co.uk .

Posted by Peter Nicholas on Monday, March 19, 2012 at 12:19 PM

Deathbed Will Invalid in Absence of Positive Communication

A controversial ‘deathbed will’ decision has been overturned by the Court of Appeal.

The case concerned a challenge to a will made only hours before the testator died in hospital. His revised will made his sister (now also deceased) his sole beneficiary. The will was written out longhand by his sister’s daughter and apparently signed by his sister on his behalf when he proved to be too feeble to hold the pen. Handwriting experts had given evidence that the signature was not that of the deceased.

Despite conflicting evidence as to how the will was signed – one witness claimed it was his daughter or perhaps grand-daughter who ‘steadied his hand’ – the lower court accepted that the deceased had sufficient mental capacity to create a new will and that the signature was added ‘at his direction’.

However, the Court of Appeal ruled that there was insufficient evidence that the testator had given a ‘positive communication’ to his sister that she should sign the will. It was therefore ruled to be invalid.

This case will come as a relief to families concerned that a ‘last minute’ will, made in the last few hours of the life of a relative, may suddenly materialise and undermine the previously understood position. It affirms that in such circumstances, the Court will require relatively strong evidence that the deceased was of sound mind and had genuinely changed their mind in their final hours, not just acquiesced to the wishes of others.
This also serves to highlight the importance of ensuring that a will is properly completed in accordance with the legal formalities required for making a valid will. The will must be signed by the Testator (the person making the will) in the presence of two independent witnesses who must also sign the Will in the presence of the testator and in the presence of each other i.e. all three should be together. It is not difficult to fall foul of the rigorous formalities required for the valid execution of a will.

If you would like further information or advice regarding the matters raised in this article please contact Anthony Davies by email to Anthony.D@daviesparsonssolicitors.co.uk or telephone 01554 749144
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

Posted by Peter Nicholas on Wednesday, March 14, 2012 at 12:02 PM

Fraudulent Illegal Contracts

Can a worker enforce employment rights dependent on a contract of employment if the contract was illegal from the outset?
No, says the Employment Appeal Tribunal in Zarkasi v Anandita.

The claimant was an Indonesian domestic worker recruited from Indonesia to work for a family in the UK. To enter the UK she obtained an identity card, passport and visa from a passport office in Jakarta using a false identity. Ultimately she left her employer in the UK and brought a number of employment claims dependent on a contract of employment.

It was held by an employment tribunal that she had freely and voluntarily participated in an arrangement to enter the UK by pretending to be someone else in order to work for her employer. That made the contract unlawful as being proscribed by law when it was first entered into. As such it was unenforceable, as were any statutory rights dependent on it. Notwithstanding this, the claimant asserted she had been the victim of human trafficking and that the tribunal should, in the spirit of the European Convention on Action against Trafficking in Human Beings, provide her with a remedy. The tribunal rejected this - it had no jurisdiction or powers in that regard. The EAT agreed with the tribunal on both points.

Nor could her claim for race discrimination succeed. Her treatment was not because she was Indonesian, but because she was in the UK illegally and without a work permit.
This publication is for guidance only. Reliance should not be placed upon it and nor should action be taken, without obtaining advice in respect of the specific circumstances applicable. We will be pleased to provide such advice or assistance.

Posted by Peter Nicholas on Wednesday, March 14, 2012 at 11:59 AM

Missing Person Families Need New Rights

The recent publicity about the still unresolved mystery of the whereabouts of Lord Lucan nearly 40 years since he disappeared, has highlighted that, according to a report by the Justice Select Committee, new legislation is needed to make it easier for families to resolve the affairs of missing people. The complex legal landscape means that families often have to pay to pursue multiple proceedings before everything is resolved. This can prove costly for families.
 

The MPs want the Ministry of Justice to introduce legislation based on the Scottish Presumption of Death Act 1977, according to Trina Wilkins, a solicitor in DPA Law, "The new law should set out a single statutory process whereby a certificate of presumed death can be issued to resolve all the affairs of a missing person, in much the same way as a death certificate.” A new Presumption of Death Act in Wales and England, on the model of the Scottish Act, would allow an application for a presumption of death order after seven years.
 

The report also recommends that the Government introduces provision for 'guardianship' orders to protect the financial position of the missing person or his or her dependants. During an initial seven year period a guardianship provision would allow families to maintain the person’s estate by cancelling direct debits such as gym membership, pay off any debts, and provide maintenance for the missing person's dependents, if necessary. Trina comments: “The Ministry of Justice should also develop guidance for families on the law and processes in this area. Easily available guidance from the Government would help families to begin navigating the system.”

If you feel you may need advice, Trina Wilkins can advise you on the latest law in this field. Call Trina on 01554 749144 for further information, or contact her by e-mail at Trina.W@daviesparsonssolicitors.co.uk .

The Ministry of Justice Select Committee Report can be viewed at:
http://www.parliament.uk/business/committees/committees-a-z/commons-select/justice-committee/news/publication-of-presumption-of-death-report

Posted by Peter Nicholas on Thursday, March 08, 2012 at 11:16 AM

Unoccupied Property Not Used for Business Purposes

Owners of agricultural businesses should note the implications of a recent decision of the Upper Tribunal after a successful appeal by HM Revenue and Customs (HMRC) regarding the availability of Agricultural Property Relief (APR) for Inheritance Tax (IHT) purposes.

HMRC appealed against a decision to allow a claim for APR in respect of a bungalow which had been occupied by an elderly partner in a farming business. The effect of the claim was to reduce the IHT on his estate when he died because the bungalow was treated as a ‘business asset’ and thus qualifying for APR.

HMRC’s appeal was based on the fact that for the last four years of the man’s life the bungalow had remained empty and the elderly partner had lived in a care home. He did not actively participate in the farming business during that time, although he remained a partner.

The Upper Tribunal considered that there was an insufficient link between the need for the bungalow to be occupied and the agricultural business activity. For APR to be allowed the bungalow would have to have been ‘occupied for agricultural purposes’ for the seven years prior to the man’s death: this requirement was not met as a matter of fact.
If you have an agricultural business and have buildings that are unoccupied for the purposes of the business, a claim for APR in respect of them may be resisted by HMRC. Contact us for advice.
If you would like further information or advice regarding the matters raised within this article please contact Chris Davies by email to chris.d@daviesparsonssolicitors.co.uk or by telephone 01554 749144.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

Posted by Peter Nicholas on Tuesday, March 06, 2012 at 03:24 PM

Restrictive Covenants and Confidential Information

Should an employer get an injunction, based on a contractual confidentiality clause when there are no restrictive covenants - to prevent a former employee in possession of confidential information from working for the employer's competitor, or from using that information when it might harm the employer's interests?

No, says the Court of Appeal in Caterpillar Logistics Services (UK) Ltd v Huesca de Crean, turning down the former employer's appeal against the refusal of an interim injunction and a strike-out of the claim by the High Court, but leaving some scope for fact-sensitive distinctions.

There were two main issues on appeal. The first was the Appellant's request for 'barring-out relief' - to prevent the employee from working for the competitor at all on the basis of an alleged fiduciary duty arising from holding confidential information; the second was an injunction to prevent the employee from using the employer's confidential information if she was working for the competitor.

The Court of Appeal unanimously rejected the application for barring-out relief, distinguishing the fiduciary duty to a client that a solicitor or adviser engaged litigation would be subject to, preventing it from acting against a former client's interests with confidential information, from that of a former employee, who was not ordinarily a fiduciary to her former employer, with the Court doubting that an employee would be a fiduciary other than in the most exceptional circumstances.

By a majority, the Court of Appeal refused the application for an injunction in respect of the feared use of confidential information by the former employee on the facts, noting the lack of any real risk of harm to the Appellant, but, differing from the High Court, observed that an employee's duty of confidentiality could be indefinite and therefore might be subject to injunctive relief.

This publication is for guidance only. Reliance should not be placed upon it and nor should action be taken, without obtaining advice in respect of the specific circumstances applicable. We will be pleased to provide such advice or assistance.

Posted by Peter Nicholas on Tuesday, March 06, 2012 at 03:23 PM

Employment Tribunal Fee Consultation Closes

Ministry of Justice consultation closes on introducing fees for employment tribunals having put forward two options.


The first would see an initial fee of £150 to £250 to begin a claim, with an additional fee of between £250 to £1,250 if the claim progresses to a hearing. Under this arrangement there would be no limit to the maximum award.
 

The second would see a single fee of between £200 to £600, with the maximum award capped at £30,000. There would be the option of an additional fee of £1,750 for those who seek awards above this amount.


TUC says that introducing employment tribunal fees will 'deny the poorest workers justice', while ACAS says the measures would cause employers to adopt a more blaze attitude to resolving disputes if they know cases are less likely to progress to a hearing.


This publication is for guidance only. Reliance should not be placed upon it and nor should action be taken, without obtaining advice in respect of the specific circumstances applicable. We will be pleased to provide such advice or assistance.

Posted by Peter Nicholas on Tuesday, March 06, 2012 at 03:21 PM