News Archive for April, 2012

Dismissal Procedures

There have been many changes to employment law and regulations in the last few years. A key area is the freedom or lack of freedom to dismiss an employee.

An employee's employment can be terminated at any time but unless the dismissal is fair the employer may be found guilty of unfair dismissal by an Employment Tribunal.

We set out below the main principles involved concerning the dismissal of employees including some common mistakes that employers make. We have written this factsheet in an accessible and understandable way but some of the issues may be very complicated.

Professional advice should be sought before any action is taken.

The right to dismiss employees
Reasons for a fair dismissal would include the following matters:

•the person does not have the capability or qualification for the job (this requires the employer to go through consultation and/or disciplinary processes)
•the employee behaves in an inappropriate manner (the company/firm's policies should refer to what would be unreasonable behaviour and the business must go through disciplinary procedures)
•redundancy, providing there is a genuine business case for making (a) position(s) redundant with no suitable alternative work, there has been adequate consultation and there is no discrimination in who is selected
•the dismissal is the effect of a legal process such as a driver who loses his right to drive (however, the employer is expected to explore other possibilities such as looking for alternative work before dismissing the employee)
•some other substantial reason.
Claims for unfair dismissal
After one year's service employees can make a claim to an Employment Tribunal for unfair dismissal within three months of the date of the dismissal and if an employee can prove that he/she has been pressured to resign by the employer he/she has the same right to claim unfair dismissal or constructive dismissal.

If the employee wins his/her case the Tribunal can choose one of three remedies which are:

•re-instatement which means getting back the old job on the old terms and conditions
•re-engagement which would mean a different job with the same employer
•compensation where the amount can be anything from a relatively small sum to an unlimited amount if the dismissal was due to some form of discrimination.
If the dismissal is demonstrated as being due to any of the following it will be deemed to be unfair regardless of the length of service:

•discrimination for age, disability, gender reassignment, race, religion or belief, sex, sexual orientation or marriage and civil partnership
•pregnancy, childbirth or maternity leave
•refusing to opt out of the Working Time Regulations
•disclosing certain kinds of wrong doing in the workplace
•health and safety reasons
•assertion of a statutory right.
Statutory disciplinary procedures
The Dispute Resolution Regulations 2004 whereby employers were required to follow a standard three-step Dismissal and Disciplinary Procedure (DDP) or failure to so would result in dismissal being automatically unfair, was repealed with the introduction of the Employments Act 2008 which came into force in April 2009 and was replaced with the ACAS Code of Practice whereby there is no automatic unfair dismissals related to failure to follow procedure. However, tribunals will be able to make an adjustment of up to 25% where the ACAS code has not been followed.

The ACAS Code of Practice essentially mirrors the DDP and must be used before an employer dismisses or imposes a significant sanction on an employee such as demotion, loss of seniority or loss of pay.

The ACAS Code does not apply to redundancy or expiry of a fixed term contract.

Standard procedure

Step 1 Employers must set out in writing the reasons why dismissal or disciplinary actions against the employee are being considered. A copy of this must be sent to the employee who must be invited to attend a meeting to discuss the matter, with the right to be accompanied
Step 2 A meeting must take place giving the employee the opportunity to put forward their case. The employer must make a decision and offer the employee the right to appeal against it.
Step 3 If an employee appeals, you must invite them to a meeting to arrive at a final decision

There may be some very limited cases where despite the fact that an employer has dismissed an employee immediately without a meeting, an Employment Tribunal will very exceptionally find the dismissal to be fair. This is not explained in the regulations but may apply in cases of serious misconduct leading to dismissal without notice. What this means in practice awaits the test of case law.

Modified procedure

Step 1 Employers firstly set out in writing the grounds for action that has led to the dismissal, the reasons for thinking at the time that the employee was guilty of the alleged misconduct and the employee's right of appeal against the dismissal
Step 2 If the employee wishes to appeal against the decision, the employer must invite them to attend a meeting, with the right to be accompanied, following which the employer must inform the employee of their final decision. Where practicable, the appeal meeting should be conducted by a more senior or independent person not involved in the earlier decision to dismiss.

The only occasions where employers are not required to follow the ACAS Code of Practice are as follows:

•they reasonably believe that doing so would result in a significant threat to themselves, any other person, or their or any other person's property
•they have been subjected to harassment and reasonably believe that doing so would result in further harassment
•because it is not practicable within a reasonable period
•where dismissal is by reason of redundancy or the ending of a fixed term contract
•they dismiss a group of employees but offer to re-engage them on or before termination of their employment
•the business closes down suddenly because of an unforeseen event
•the employee is no longer able to work because they are in breach of legal requirements eg to hold a valid work permit.
Common mistakes that employers make
For many the regulations have caused some confusion and practical difficulties. Some of the most common mistakes include:

•not applying the procedures to employees with less than one year's service. Whilst such employees are often unable to claim unfair dismissal (unless the reason for their dismissal is one of the automatically unfair reasons for which there is no qualifying period of employment such as pregnancy), they may be able to bring other claims such as discrimination with compensation increased accordingly
•failure to invite employees to disciplinary hearings in writing or supply adequate evidence before the disciplinary hearing. The standard procedure requires the employer to set out the ‘basis of the allegations' prior to the hearing
•excluding dismissals other than disciplinary dismissals (eg ill-health terminations, retirement )
•not inviting employees to be accompanied
•not including a right of appeal
•not appreciating the statutory requirement to proceed with each stage of the procedure without undue delay
•failure to appreciate that an employee may have right to appeal even if it is requested verbally rather than in writing and is after a timescale set down by the employer
•not appreciating that paying an employee a lower bonus for performance related reasons could potentially amount to ‘action short of dismissal' by the employer
•failure to treat as a grievance any written statement/letter (for example a letter of resignation) which raises issues which could form the basis of a tribunal claim to which statutory procedures apply. This means that the employer must be alert to issues being raised in writing event if there is no mention of the words grievance.
How we can help
We will be more than happy to provide you with assistance or any additional information required.

Posted by Peter Nicholas on Friday, April 27, 2012 at 02:15 PM

Sharing Property with the Elderly

Sharing a property with an elderly relative may seem to be the perfect answer to rising property prices, and concerns over care for the elderly, but people contemplating such an arrangement should be aware of the legal and practical problems which may arise. There are a number of different ways to share property, but an equal number of pitfalls, whether legal, financial or relating to tax.

Some preliminary considerations

Whatever arrangement is under consideration it is important for there to be frank discussions beforehand about how the relationship will work. Issues which need to be covered include:

•How will bills be paid – by whom and in what proportions?
•What facilities will be provided – are there any “rules” about use of rooms?
•What level of support will be provided to the elderly person – for example, companionship; preparation of meals; laundry; shopping
•When will the relationship come to an end, for example, due to the increasing needs of elderly person or a breakdown in the personal relationship?
•If there are to be financial consequences, either during the elderly person’s lifetime, or on death, then these need to be discussed with other family members, particularly those who may be expecting to inherit
Options for sharing property

Some of the more common options for sharing property are:

1. The Elderly Person Moving in with Relatives
In many ways, this is the simplest solution. Although no legal documentation is necessary, it may be helpful to draw up a licence recording some of the issues referred to above, particularly covering the circumstances in which the elderly person is to move out. The position may be complicated if the elderly person originally owned the house and gifted it to the relatives now living there, or if a capital contribution is made eg to pay off the mortgage. Professional advice should be sought in such circumstances.

2. Building a “Granny flat”
Extending an existing property to build a “granny flat” is more complicated both in terms of the planning and building regulation consent which is likely to be required, and the financing of the extension. If the elderly person contributes towards the cost, then is this a loan, or gift, or is the elderly person to have ownership of part of the property?

If the older person gains an interest in the property, then what will happen if the property has to be sold, eg in the event of financial problems or divorce? There may also be an issue if the elderly person needs to move into a care home, and the local authority carries out a financial assessment. For all these reasons it is important that appropriate legal documentation is drawn up to reflect the nature of the financing.

Different inheritance tax (IHT) consequences flow depending on the nature of the financial contribution. If the elderly person has a share in the property then it will form part of their estate on death; and this may also be the case if the money is a gift (if the gift with reservation of benefit rules are deemed to apply).

3. Moving into the Elderly Person’s house
Younger people may decide to move into an elderly relative’s house on the understanding that they will provide certain care services, in return for a share in the property, either immediately or on death. Whatever arrangement is reached should be documented properly, in order to ensure that it is enforceable and to avoid adverse tax consequences. It is advisable that other family members are involved in discussions and are happy with what is proposed. Some of the potential problems are:

•A gift by the older person will still be subject to IHT until they have survived 7 years since the date of the gift
•If an older person moves into a care home shortly after making the gift, then the local authority may seek to claw it back to form part of the estate
•A “promise” to leave property to someone after death which is not reflected in a will may be enforceable – but it gives rise to complicated legal and factual arguments
4. Joint Purchase of Property
Sometimes both parties may decide to sell their properties and buy a new home in which they can all live, thus saving the costs of running two households and enabling some element of care and support to be provided to the older party. In these cases, it is important to identify who will own the property ie whether the older person is making a gift or loan of the money, or whether all contributing parties will be co-owners.

As mentioned previously if the money is intended as a gift it will be exempt from inheritance tax provided the donor lives for 7 years. If the money is a loan, then it remains part of the older person’s estate for IHT purposes. If the parties are to be co-owners, then a declaration of trust needs to be drawn up recording their percentage interests in the property.

It is particularly important in these circumstances to document what will happen if any of the family relationships involved break down.

How we can help

We can advise on the drafting of loan documents, licences or declarations of trust necessary to record the parties’ intentions, and on the tax consequences of what is involved, as well as the impact on any assessments which the local authority may carry out.

Posted by Peter Nicholas on Friday, April 27, 2012 at 02:07 PM

Business Structures - Which Should I Use?

Having made the decision to be your own boss, it is important to decide the best legal and taxation structure for your enterprise. The most suitable structure for you will depend on your personal situation and your future plans. The decision you make will have repercussions on the way you are taxed, your exposure to creditors and other matters.

The possible options you have are as follows.

Sole trader
This is the simplest way of trading. There are only a few formalities to trading this way, the most important of which is informing HMRC. You are required to keep business records in order to calculate profits each year and they will form the basis of how you pay your tax and national insurance. Any profits generated in this medium are automatically yours. The business of a sole trader is not distinguished from the proprietor's personal affairs so that if there are any debts, you are legally liable to pay those debts down to your last worldly possession.

A partnership is an extension of being a sole trader. Here, a group of two or more people will come together, pool their talents, clients and business contacts so that, collectively, they can build a more successful business than they would individually. The partners will agree to share the joint profits in pre-determined percentages. It is advisable to draw up a Partnership Agreement which sets the rules of how the partners will work together. Partners are taxed in the same way as sole traders, but only on their own share of the partnership profits. As with sole traders, the partners are legally liable to pay the debts of the business. Each partner is 'jointly and severally' liable for the partnership debts, so that if certain partners are unable to pay their share of the partnership debts then those debts can fall on the other partners.

Limited company
A limited company is a separate legal entity from its owners. It can trade, own assets and incur liabilities in its own right. Your ownership of the company is recognised by owning shares in that company. If you also work for the company, you are both the owner (shareholder) and an employee of that company. When a company generates profits, they are the company's property. Should you wish to extract money from the company, you must either pay a dividend to the shareholders, or a salary as an employee. The advantage to you is that you can have a balance of these two to minimise your overall tax and national insurance liability. Companies themselves pay corporation tax on their profits after paying your salary but before your dividend distribution. Effective tax planning requires profits, salary and dividends to be considered together.

There are many advantages as well as disadvantages to operating through a limited company. We have a separate factsheet on 'Incorporation' which considers the relative merits as well as the downsides of operating as a company.

New companies can be purchased relatively cheaply in a ready-made form usually referred to as 'off the shelf' companies. There are additional administrative factors in running a company, such as statutory accounts preparation, company secretarial obligations and PAYE (Pay as You Earn) procedures. A big advantage of owning a limited company is that your personal liability is limited to the nominal share capital you have invested.

Limited liability partnership
A limited liability partnership is legally similar to a company. It is administered like a company in all aspects except its taxation. In this, it is treated like a partnership. Therefore you have the limited liability, administrative and statutory obligations of a company but not the taxation and national insurance flexibility. They are particularly suitable for medium and large-sized partnerships.

A co-operative is a mutual organisation owned by its employees. One example of such an organisation is the John Lewis Partnership. These structures need specialist advice.

How we can help
We will be happy to discuss your plans and the most appropriate business structure with you. The most appropriate structure will depend on a number of factors including consideration of taxation implications, the legal entity, ownership and liability.

For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.

Posted by Peter Nicholas on Friday, April 27, 2012 at 10:20 AM

The Basics of Starting a Business

It is the ambition of many people to run their own business. Some may have been made redundant and find themselves with free time and financial resources. Others make the decision to start up in business to be more independent and obtain the full financial reward for their efforts.

Whatever the reason, a number of dangers exist. Probably the greatest concern is the possibility of business failure.

Read on for guidance on some of the factors which need to be considered before trading begins.

This factsheet cannot cater for every possibility and any decisions should be supported by professional advice.

Initial considerations
In order to make your business a success there are a number of key factors which should be considered:

•commitment - starting a business is demanding. Determination and enthusiasm are essential
•skills - you will need managerial, financial, technical and marketing skills. If you do not have these skills personally, they can be found in a partner or employee, or acquired through training
•your product or service should have a proven or tested market, but must not conflict with the patent or rights of an existing business.
In addition to these general considerations there are a number of more specific matters.

The business plan

The business plan is the key to success. If you need finance, no bank manager will lend money without a sensible plan.

Your plan should provide a thorough examination of the way in which the business will commence and develop. It should describe the business, product or service, market, mode of operation, capital requirements and projected financial results.

Business structure

There are three common types of business structure:

•Sole trader
This is the simplest form of business since it can be established without legal formality. However, the business of a sole trader is not distinguished from the proprietor's personal affairs.
A partnership is similar in nature to a sole trader but because more people are involved it is advisable to draw up a written agreement and for all partners to be aware of the terms of the partnership. Again the business and personal affairs of the partners are not legally separate. A further possibility is to use what is known as a Limited Liability Partnership (LLP).
The business affairs are separate from the personal affairs of the owners, but there are legal regulations to comply with.
The appropriate structure will depend on a number of factors, including consideration of taxation implications, the legal entity, ownership and liability.

Business stationery

There are minimum requirements for the contents of business stationery, both paper and electronic, which will depend on the type of business structure.

Books and records

All businesses need to keep records. They can be maintained by hand or may be computerised but should contain details of payments, receipts, credit purchases and sales, assets and liabilities. If you are considering purchasing computer software to maintain your records, obtain professional advice.


The books and records are used to produce the accounts. If the records are well kept it will be easier to put together the accounts. Accounts must be prepared for HMRC and if a company is formed there are strict legal requirements as to their layout. The accounts and company tax return must now be submitted electronically to HMRC in a specific format.

A company and a LLP may need to have an audit and will need to make the accounts publicly available by filing them at Companies House within a strict time limit.


When starting in business, taxation aspects must be considered.

•Taxation on profits
The type and rate of taxation will depend on the form of business structure. However, the taxable profit will normally differ from the profit shown in the accounts due to certain expenses which are not allowed for tax purposes and the timing of some tax allowances. Payment of corporation tax must be made online.
•National insurance (NI)
The rates of NI contributions are generally lower for a sole trader or partnership than for a director of a company but the entitlements can also differ. In a company, it may be possible to avoid NI by paying dividends rather than salary.
•Value added tax (VAT)
Correctly accounting for VAT is an essential part of any business and neglect may result in a significant loss.

When starting a business you should consider the need to register for VAT. If the value of your taxable sales or services exceeds the registration limit you will be obliged to register.
Employing others

For the business to get off the ground or to enable expansion, it may be necessary to employ staff.

It is the employer's responsibility to deduct income tax and national insurance and to account for student loan deductions. The balance must then be paid over to HMRC. Payroll records should be carefully maintained.

You will also need to be familiar with employment law.


There are many pitfalls to be avoided in choosing a property. Consideration should be given to the following:

•suitability for the purpose
•compliance with legal regulations
•local by-laws
•physical restrictions such as access.

Comprehensive insurance for business motor vehicles and employer's liability insurance are a legal requirement. Other types of insurance such as public liability, consequential loss, business assets, Keyman and bad debts should be considered.


Putting money into a pension scheme can be a way of saving for retirement because of the favourable tax rules. Many businesses have to provide access for their employees to a stakeholder pension.

How we can help
Whilst some generalisation can be made about starting up a business, it is always necessary to tailor the strategy to fit your situation. Any plan must take account of your circumstances and aspirations.

Whilst business success can never be guaranteed, professional advice can help to avoid some of the problems which befall new businesses.

We would welcome the opportunity to assist you in formulating a strategy suitable for your own requirements. We can also provide key services such as bookkeeping, management accounts, VAT return and payroll preparation at an early stage.

Posted by Peter Nicholas on Friday, April 27, 2012 at 10:02 AM

Relationship Breakdown - Divorce Procedure

From April 6 2011 all separating couples will have to at least show that they have been in contact with an accredited mediator and have considered how mediation might work for them. If, having considered mediation, they reject the option, then they will still have the option of taking the matter to court.

The new rules bring all divorce cases into line with the situation where couples have been granted legal aid and those proposing the changes hope it will save money.

Some cases will still be allowed to go straight through to court, such as in cases where there are allegations of domestic violence or child protection matters.

When can I get a Divorce?
In order to get a divorce you need to have been married for more than twelve months. You will also need to show that the marriage has broken down.

To prove that the marriage has broken down you will need to show one of the following:

You do not need to know the identity of the person that your spouse has committed adultery with and you do not need to name them on the Divorce Petition. However, if your spouse denies the adultery then you may be requested to prove it. This can be very difficult and for this reason divorce petitions based on this ground do not always succeed.
•Unreasonable Behaviour
You will be asked to give examples in the divorce petition about your spouse's unreasonable behaviour. You must also state why this has made it difficult for you to continue living with them. You may use adultery as an example and you would not need to prove the adultery. This may be a better option than relying on adultery as the only ground.
•2 Years Desertion
You will need to supply the date of when your spouse left you and show that you have not heard from your partner since that date. You cannot start divorce proceedings until your spouse has been left for two years.
•2 Years Separation
In order to use this ground for divorce your spouse must agree to the divorce. You will need to put the date of the separation on the divorce petition and state briefly the reason for the separation. If you do not know the exact date of the separation you can give an approximate date as long as it can be clearly shown that two years have passed.
•5 Years Separation
You do not need your spouse's consent to divorce on this ground. This ground is therefore useful if you know that you will have difficulty getting your spouse's consent. You will need to give details of the date of the separation and brief reasons why you separated.
Starting Divorce Proceedings
1.The Applicant's solicitors (or the applicant) send the Divorce Petition, with the court fee and the marriage certificate, to the court. If you have children, the Divorce Petition should be accompanied a statement about the arrangements for children.
2.The court will register the case, process the papers and send copies of the Petition, the statement of arrangements for children and an Acknowledgment of Service form to the Respondent or the Respondent's solicitors.
3.The Respondent or their solicitor will fill in the Acknowledgment of Service form, stating that the papers have been received and read and that the divorce is not being contested.
4.The Acknowledgment of Service is filed by the court and a copy of the completed form is sent to the Applicant or the Applicant's solicitor.
5.The Applicant's solicitor or the Applicant prepare an Affidavit (a sworn statement) stating on oath that the contents of the Divorce Petition are true. The Solicitor or the Applicant then file the Affidavit at court along with a form requesting that the divorce papers are considered with a view to granting the decree nisi.
6.The District Judge considers the filed papers and decides whether a decree nisi should be granted. If the Judge decides that the decree nisi should be granted then both parties are notified by the Court of the date and time when the decree nisi will be announced in court.
7.The court pronounces the decree nisi. It is not necessary for anyone to attend court on this date as it is simply a formality.
8.A sealed copy of the decree nisi is sent to both parties or their solicitors.
9.Six clear weeks after a decree nisi has been granted the Applicant or their solicitor can apply for a decree absolute. If no application is made the Respondent can apply for a decree absolute three months from the date of the decree nisi. If no application for a decree absolute has been made within one year the Applicant must explain the delay to the court who then have a discretion to grant or refuse it.
10.The court sends the sealed decree absolute to both parties or their solicitor. The marriage has now officially ended.
Can I get my Marriage Annulled?
Under certain circumstances you may be able to have your marriage annulled. You must apply to annul the marriage within a reasonable period of time, in some cases this will be three years. There is no requirement to have been married for twelve months.

Examples of when you may seek an annulment of your marriage are:

•The marriage has not been consummated.
•At the time of marriage your spouse was already married to someone else.
•One of you was under 16 years of age when you got married.
•You have married a close relative.
•Your spouse had a venereal disease at the time of marriage and they knew about it but you didn't.
•Your spouse was pregnant with another person's child at the time of the marriage and they knew about it but you didn't
A divorce can take as little as four to five months from start to finish, although it may take much longer. The time taken is very much dependent on the complexities of the finances involved. This are normally dealt with between the time of Decree Nisi being granted and the application for Decree Absolute.

How Can We Help
Divorce is a difficult time for those involved. The courts are concerned that disputes are not brought to court unless there is no other alternative. Generally, a settled divorce will be less costly than a contested divorce case. With this in mind,our qualified and experienced family team will seek to advise you throughout the divorce process, as well as offering you information about alternative resolution options. We can also help you with the protection and distribution of jointly owned assets, both property and financial, and with any issues relating to your children.

Posted by Peter Nicholas on Thursday, April 26, 2012 at 03:33 PM

Package Holiday or Travel Booking?

Firms that provide package holidays are liable under English law for injuries arising from negligence in the provision of services or accommodation that are part of the package. However, where a travel agent organises travel and accommodation that are not part of a package, liability will rest with the individual firm whose negligence caused the injury.

Accordingly, whether a holiday is a package or just a booking of travel and accommodation arrangements can make a big difference when it comes to the legal position if something goes wrong.

A recent case shows why. It involved a man who booked a ‘last minute’ holiday that was advertised on Teletext. When he suffered an injury whilst on the holiday, he sought compensation from the firm with which he had made the booking. It claimed, however, that the agent would have read a script to him, making it clear that it was acting as the agent for the holiday provider and, in consequence, proceedings could not be brought against it.

The matter ended up in the Court of Appeal. It concluded that since the man was not specifically told that he could book the flights without the accommodation and the invoice included ‘service charges’ that were not explained, it must be a package holiday, with the service charges representing the cost of creating the package out of the cost of the flights and the accommodation.  The man was therefore able to bring his action against the travel agent.

We can advise you on the best course of action to take if you are injured or become ill on holiday due to the negligence of the holiday provider.

Posted by Peter Nicholas on Wednesday, April 25, 2012 at 09:41 AM

The National Minimum Wage Exemption for Domestic Workers

Although most workers of schoolleaving age or older are entitled to be paid the National Minimum Wage (NMW), there is an exception (under Regulation 2(2) of the NMW Regulations 1999) where a domestic worker is being treated as a member of their employer’s family.

For the exemption to apply, the worker must reside in the family home and be treated as a family member, in particular with regard to the provision of accommodation and meals (without any liability to pay) and the sharing of tasks and leisure activities.

In Jose and others v Julio and others, the Employment Appeal Tribunal (EAT) found that the exemption did apply to three foreign domestic workers employed by families, so they were not entitled to be paid the NMW.  In reaching its decision, the EAT held that when deciding whether or not the exemption applies, the worker’s position in the family must be considered holistically. Regulation 2(2) should be interpreted narrowly, with particular regard given to the provision of accommodation and meals and the sharing of tasks and leisure activities, but this does not exclude having regard to other material matters, such as the general dignity afforded to the worker, the degree of privacy they are given and the extent to which, if at all, they are exploited.

As regards the meaning of the words ‘the sharing of tasks’, this does not include work that the worker was employed to do but refers to those tasks performed by the family as a unit.  For the exemption to apply, it is not necessary for the worker to share all meals, tasks and leisure activities with the family but that they are treated as a member of the family in those particular respects.

Each family is different and the habits of the individual family have to be examined when determining whether or not the condition is satisfied in each particular
case.  Although exploitation or mistreatment of the worker was not a feature of this case, the EAT indicated that where an employer exploits a worker’s position as a migrant worker – for example by paying them less than the agreed amount over a substantial period – this would run counter to treating them as a member of the family and the exemption would not
therefore apply.

Contact us for advice on any employment law matter.

Posted by Peter Nicholas on Tuesday, April 24, 2012 at 02:17 PM

Non-Doms to Get IHT Boost?

If you are considering making a transfer to your nondomiciled spouse or civil partner – for which the ‘Inheritance Tax (IHT) free’ limit is currently £55,000 – you should be aware that the latest Budget contained a commitment to give non-domiciled spouses a greater IHT exemption.  This was not mentioned in the Chancellor’s speech, but details should be in the Finance Act in July.

The change is said to have been forced on the Government as a result of pressure from the EU. Currently, approximately one in seven marriages and civil partnerships in the UK involves at least one person potentially domiciled outside the UK for IHT purposes.

Posted by Peter Nicholas on Tuesday, April 24, 2012 at 12:13 PM

New Minimum Wage Rates

The Government has announced that it has accepted the recommendations of the Low Pay Commission on the rates for the National Minimum Wage that will apply from 1 October 2012.

The rates are as follows:

  • The adult hourly rate will increase from £6.08 to £6.19;
  • The development rate (which covers workers aged 18-20 will remain at £4.98; and
  • The rate for workers aged 16 and 17 will remain at £3.68.

The apprentice rate, for apprentices under 19 or those aged 19 or over and in the first year of their apprenticeship, will increase from £2.60 to £2.65 per hour.

Posted by Peter Nicholas on Tuesday, April 24, 2012 at 11:44 AM

Husband Who Failed to Disclose Assets Faces Further Payments

When the marriage between a wealthy property developer and his wife ended acrimoniously, their battle over the financial settlement lasted more than
a decade.

As part of their divorce settlement following their separation in 2000, the husband was ordered to pay his wife £176,000 in ‘full and final settlement’ of her financial claims against him. However, she continued to be surprised at her ex-husband’s ‘apparent wealth’ and this led her to question whether he had in fact made a full and frank disclosure of his assets at
the time of their divorce.

It was subsequently ascertained that a house owned by the property developer, which is now worth more than £1.3 million, had not been disclosed. He claimed that it was owned by him in trust for one of the couple’s children.

The court was unimpressed and, in 2010, ordered him to pay an additional £384,000 to his ex-wife. He was also ordered to pay her legal costs. His appeal against that decision, in which he claimed that his assets had been ‘grossly overvalued’ by the judge who ordered the settlement, was heard recently. After a five-day hearing, it was
dismissed by the Court of Appeal.

The man was criticised by the Court for the lack of credibility of his evidence and for his failure to produce reliable documentary evidence. In the circumstances, the judge’s findings, which were findings of fact, could not be displaced.

The courts take a dim view of people who fail to make a full and frank disclosure of their assets in cases such as this. The costs of a further hearing can make non-disclosure very expensive and taking an intransigent approach is not normally advisable.

We can advise you on all family law issues, including what to do if your partner is attempting to distort or conceal their true financial position when the relationship has failed.

Posted by Peter Nicholas on Tuesday, April 24, 2012 at 11:33 AM

Village Greens – Latest Decisions

Arecent ruling in which ‘village green’ status was withdrawn from an area of land in Dorset highlights the fact that the granting of village green status does not necessarily mean that the land will be free from the risk of development in perpetuity.

New guidance issued by the Government will make it more difficult for a community to achieve registration of land as a village green and make it easier for developers to apply for such land to be deregistered.

However, all is not plain sailing for developers. The decision in a well-reported case in which land in West Yorkshire that had been registered as a village green was ordered to be
deregistered has now been overturned.  Deregistration was ordered originally because of a technicality. To qualify for village green status, the land has to have been used as a village green by a ‘significant number of inhabitants of a locality’.

The developer successfully argued that the users of the land came from two different villages, neither of which was of sufficient administrative stature to meet the necessary qualifying criteria. This decision has now been overturned. Defeating unwanted planning applications can be a difficult task.

Our property specialists will be pleased to advise on the steps you or your community can take.

Posted by Peter Nicholas on Tuesday, April 24, 2012 at 11:01 AM

Annual Leave and Non-Working Periods

The Supreme Court has upheld a decision of the Court of Session in Scotland that employers are entitled to require offshore workers in the oil and gas industry to take theirannual leave during their ‘field breaks’ (Russell and others v Transocean International Resources Ltd. and others).

The claimants were contracted to work a pattern of two weeks offshore followed by a two-week period of field break onshore. Whilst offshore, they worked 12-hour shifts followed by a 12-hour break. Whilst onshore, they were, for the most part, free from any work-related obligations and could spend their time as they chose.

The workers claimed that the annual leave provisions of the Working Time Regulations 1998, which give effect to the EC Working Time Directive (WTD) in domestic law, required their employers to permit them to take their annual leave during periods when they would otherwise be required to work on the offshore installation. The employers argued that the paid annual leave entitlement was satisfied by the two weeks’ onshore time included in the overall shift pattern.

The Employment Tribunal upheld the workers’ claim on the ground that the entitlement to leave involved a release from what would otherwise have been an obligation to work, but this decision was set aside by the Employment Appeal Tribunal and, subsequently, the Court of Session. The workers took their case to the Supreme Court.

The Supreme Court was of the view that the workers were under contract with their employers for the whole year, notjust for the 26 weeks when they were offshore. The fact that
their pattern of working was a repeating shift pattern was a product of that contractual relationship. As the European Court of Justice (ECJ) has repeatedly made clear, the purpose of the entitlement to annual leave is to enable the worker to rest and enjoy a period of relaxation and leisure and, to that end, the WTD lays down minimum periods of rest that must be provided in each work cycle.

The ECJ has made no ruling, however, that a pre-ordained rest period,during which a worker is free from any obligations to the employer, can never constitute annual leave. In the Supreme Court’s view, ‘rest period’ simply means any period which is not working time and any period when offshore workers are on a field break onshore would fall into that category.

The Court refused a request for a referral to the ECJ regarding the exact definition of the term ‘annual leave’ under the WTD on the ground that this was not necessary.  For the purposes of this judgment, the meaning of the expression was not open to any reasonable doubt.

This decision means that where workers are contracted to a shift pattern that includes weeks spent not working, the employer can require them to take their annual leave entitlement during the time they are not obliged to work.

Posted by Peter Nicholas on Tuesday, April 24, 2012 at 10:29 AM

Weight Watchers UK Lose the Battle

The recent case of Weight Watchers UK Ltd. (WW) v HM Revenue and Customs (HMRC) serves as a reminder to employers of the dangers of having contractual arrangements in place that do not match the reality of the employment arrangements of those engaged to carry out work for your organisation.

WW operated on the basis that its ‘Leaders’ – former members engaged to arrange and conduct meetings for others wishing to lose weight by following the WW Programme – were self-employed, not employees of the company. They were required to pay their own Income Tax (IT) and National Insurance Contributions (NICs). However, in 2007, HMRC ruled
that the Leaders were employees of WW for the purposes of IT and NICs. WW appealed against the decision.

The First-Tier Tribunal found that, on balance, the terms and conditions of the contractual relationship between WW and its Leaders were characteristic of contracts of service as opposed to contracts for services, meaning that the Leaders were employees of WW.

The Upper Tribunal agreed and dismissed a further appeal. In doing so, it took a purposive approach to the issue, paying due regard to the practical realities of the relationship in question, as is called for by the decision of the Supreme Court in Autoclenz v Belcher. The Tribunal found nothing in the arguments put forward by WW that was sufficient to disturb the ‘on balance’ conclusion that, taken as a whole, the Leaders were employees of WW rather than independent

Contact us for advice on any contractual matter.

Posted by Peter Nicholas on Tuesday, April 24, 2012 at 10:20 AM

Claim Over Entitlement to Rest Breaks Not Time Barred

Under the Working Time Regulations 1998 (WTR), an adult worker is entitled to a rest period of not less than eleven consecutive hours in each 24-hour period during which he or she works or, in certain specific circumstances, to an equivalent period of compensatory rest.

If a worker is denied this right and wishes to present a complaint to the Employment Tribunal (ET), paragraph 2 of Regulation 30 of the WTR states that this must be presented ‘before the end of the period of three months beginning with the date on which it is alleged that the exercise of the right should have been permitted…’.

In Scottish Ambulance Service v 1. Truslove 2.Wood, the Employment Appeal Tribunal (EAT) upheld the ET’s decision that the correct interpretation of paragraph 30(2) is that the time for bringing a claim starts running on each occasion that the worker did not receive the daily (or compensatory) rest to which they were entitled.

Mr Truslove and Miss Wood worked as relief ambulance workers. They lodged a grievance that the time they spent travelling to ‘detached stations’ and the time that they were on call should be counted as working time for the purposes of the WTR and taken into account when calculating their entitlement to rest breaks. When this was rejected by the Scottish
Ambulance Service, they took their claim to the ET.

The Scottish Ambulance Service argued that the claim was out of time. Its contention was that the wording of paragraph 30(2) envisaged a single date on which the time period for
bringing a claim started running and this was either when the grievance was refused or the date of the first missed rest period. Mr Truslove and Miss Wood argued that the time period for bringing a claim started to run anew each time a rest period which should have occurred was missed.

The Employment Judge concluded that the WTR lay down minimum standards and a worker’s right to daily rest is a legal right that arises in every consecutive period of 24 hours. Any refusal by the employer cannot affect the continuation of that right. The EAT agreed with this analysis and found nothing in the wording of paragraph 30(2) that supported the interpretation put forward by the Scottish Ambulance Service.  The employer’s appeal was therefore dismissed and the case remitted to the same ET to be considered on its merits.

If a working practice in your organisation causes the WTR to be breached, the fact that this has been  accepted practice in the past will not prevent a claim. We can advise you on any working time issue.

Posted by Peter Nicholas on Monday, April 23, 2012 at 03:33 PM

Disability Discrimination – Reasonable Adjustments

Under Section 4A of the Disability Discrimination Act 1995 (DDA), employers had a duty to make reasonable adjustments if a provision, criterion or practice (PCP) placed a disabled worker at a substantial disadvantage compared with persons without a disability. Under Section 20 of the Equality Act 2010, which has now replaced the DDA, this duty remains largely the same.

The recent case of Roberts v North West Ambulance Service concerned a PCP that had a substantial effect on a disabled person, even though it did not apply to him directly.

Nathan Roberts was employed by North West Ambulance Service NHS Trust as an emergency medical dispatcher between January 2008 and January 2010, when he resigned. He suffered from a social anxiety disorder, which meant that he was disabled person for the purposes of the DDA.

He worked in a control room containing 24 work stations. The dispatchers worked on a complicated shift system, with various changeover times and overlapping shifts, so they ‘hot-desked’ – took any available work station – rather than having allocated desks.

At first, Mr Roberts chose to sit in the middle row in the control room. After periods off work with anxiety, however, he thought this location might be the cause and asked to sit in a less prominent position at the back of the room. His employer wrote to managers asking them to ensure that Mr Roberts could sit in this position when on duty and to reserve it for him if necessary. This did not always happen, however, so an agreement was reached that a ‘reserved’ sign should be put on the desk prior to Mr Roberts’ shift.

This proved difficult in practice as at busy times there was a need to use every single work station in the control room. On three occasions, Mr Roberts’ preferred seat was not available and either he or the supervisor had to ask the occupant to move. After the last of these occasions, Mr Roberts resigned and brought a claim for disability discrimination on the ground that the requirement to ‘hot-desk’ was a PCP that placed him at a substantial disadvantage in comparison with non-disabled people and that North West Ambulance Service had failed to make reasonable adjustments.

The Employment Tribunal (ET) dismissed Mr Roberts’ claim on the ground that he was not required to sit at any desk other than the one he preferred. As the PCP had not been applied to him, the duty to make reasonable adjustments did not arise.

The Employment Appeal Tribunal disagreed. In its view, the ET had erred in law in its application of Section 4A of the DDA. The ET should have followed the statutory wording and asked whether the PCP applied by North West Ambulance Service placed Mr Roberts at a substantial disadvantage in comparison with workers who were not disabled.  If so, had his employer taken reasonable steps to prevent this? A PCP may affect a disabled person even if it is not applied to them directly. The case was remitted to the same ET to reconsider the claim.

We can help you ensure your workplace policies and contractual arrangements minimise the risk of a claim of discrimination arising.

Posted by Peter Nicholas on Monday, April 23, 2012 at 02:29 PM

The Changing Face of Divorce

Statistics show that 33 per cent of marriages that took place in 1995 had ended in divorce 15 years later. This compares with 22 per cent of marriages that took place in 1970. The workload of the Family Courts has consequently risen over this period, leading to many delays.

In an effort to tackle the problem, changes to the divorce process have been proposed. Under the proposals, which have been agreed by the Government, the process for initiating divorce will begin via an online hub or telephone service.

The new web service is to be commissioned this year and will provide independent information for separating couples and direct them to services relevant to their needs. The telephone service will follow in 2013.

Divorcing parents are to be encouraged to draw up Parenting Agreements. These set out the practical arrangements consented to by the parents for the care and support of their children. The courts will no longer consider arrangements for the children in an uncontested divorce case.

The emphasis of the new system will be on resolving problems out of court, with the courts only becoming involved where really necessary. To facilitate this, legislation will require divorcing couples to attend a Mediation Information and Assessment Meeting, strengthening the requirement to consider mediation that has been in place since April 2011.

Divorce is seldom a painless process and it is easy for emotions rather than logic to drive events. It is hoped that the increased use of mediation will make the process faster and less confrontational, and also achieve a better result for all concerned.

Posted by Peter Nicholas on Monday, April 23, 2012 at 02:20 PM

Covenant Not Overridden by Planning Permission

When homeowners wished to build a first-floor extension over their garage, they obtained planning permission to do so but then found that the estate management trust for their housing development refused to allow the alteration. They challenged its right to deny them permission.

Each property on the estate was subject to a restrictive covenant to the effect that any development of the property could only take place with the permission of the estate management trust.

The property owners argued that the estate management trust’s decision should follow that of the local planning authority or, if this were not the case, they should be allowed to build the extension subject to agreeing a compensation payment to those people affected by the development. The case went all the way to the Court of Appeal.

The Court considered that if Parliament had intended that a management trust or company could not prevent a development that had been approved by the local planning authority, it would have been a simple matter for planning law to state this. It does not, save in the situation in which a compulsory purchase takes place, in which case the planning authority’s
decision does hold sway. The trust was therefore entitled to take its own view.

The Court also accepted that the role of the trust was to act in the public interest. The homeowners did not have the right to demand that a payment in compensation be accepted in
exchange for the grant of the trust’s permission. The trust had every right to conclude that a payment of money would not be sufficient compensation for the loss of local amenity.  The appeal was therefore dismissed.

Planning law is a difficult area and it is sensible to seek advice at an early stage of any proposed development.

Posted by Peter Nicholas on Monday, April 23, 2012 at 11:49 AM

Obligation on Seller Sets Boundary

Recently, a dispute reached court after the boundary of a property that had been split from another property and then resold years later was disputed by the new owner.

The dispute turned on whether a stone wall or a nearby fence marked the boundary between the two properties.  The difference in area between the two was significant – more than an acre.

The title document itself only referred to land of a specific acreage. However, the transfer deed included an obligation on the seller to ‘put in stockproof condition’ an existing fence, which was marked on the plan of the property conveyed. This was to be done within one month of the conveyance. The court considered this decisive.

There would have been no point in having that condition in the original conveyance if the fence were not the boundary between the two properties.  Accordingly, the court ruled that the disputed land had not been conveyed when the original sale took place. Since it had not formed part of the land originally conveyed, the title had never passed to the new owner.

If you have concerns regarding the boundaries of or rights over your land, we can advise you and, hopefully, help you to resolve any potential dispute without recourse to  the courts.

Posted by Peter Nicholas on Monday, April 23, 2012 at 11:46 AM

Argument Over Strip of Land Settled by Court of Appeal

Arecent case in the Court of Appeal illustrates the extent to which property owners will go to protect what they perceive to be the boundaries of their property and led Lord Justice Mummery to remark that the cost of such disputes ‘is almost always more than the disputed property is worth’.

The case arose because of a dispute over the boundary line between two properties in London. The area of disputed land was in a corner of a courtyard and was a mere four feet wide.

The decision resulted in legal costs for the loser that were massively in excess of the value of the strip of land, which led LJ Mummery to comment that ‘he that goes to law holds a wolf by the ears’ in such cases. If you have any property law issue, contact us for advice on the best course of action to take.

Posted by Peter Nicholas on Thursday, April 05, 2012 at 12:03 PM

Circumstances Support Will Challenge

Preventing a family memberfrom benefiting from yourestate can be fraught withdifficulty, even if the family member in question cannot claim to be a dependant and so is not able to make a claim on your estate under the Inheritance (Provision for Family and Dependants) Act 1975.

A recent dispute, which was settled out of court, illustrates some of the issues that can arise. It involved the estate of a man who changed his will in 2010, when he was terminally ill, in order to exclude his son and grandchildren from the lion’s share of his estate.

Under the revised will, the bulk of his estate was to pass instead to a friend.  In this case, the son was not a dependant, so the 1975 Act was not in point.  A few weeks after seeing his solicitor and changing his will, the man died.  His son contested the will. It was his contention that his mother, who had died in 2001, had quite specifically stated at a family lunch that she wanted her half share in the family home to pass to him.

Although his parents’ wills provided that their estates would pass firstly to the surviving spouse, he claimed that there was a strict understanding that his mother’s wishes would be heeded as regards her share in the home.

The son alleged that the new will had been procured as a result of undue influence, but there was sufficient evidence from his late father’s solicitor and doctor that this was not the case and that he was of sound mind when he will was drawn up.

However, he also argued that hi father and mother had made ‘mutual wills’, or had created what lawyers call a ‘secret trust’.  A secret trust is a promise to benefit someone not specifically named in the will.

Mutual wills are where people each agree to execute a separate will that disposes of their estates in a particular way. The terms of each will are usually identical and givereciprocal benefits. Following the first death, the survivor is bound by the agreement he or she made with the deceased and the property is, in effect, held ontrust for the agreed beneficiaries.

Such wills are sometimes used when people have children from a previous relationship and wish to ensure that they are not excluded from inheriting their parent’s share of a joint estate.

These arguments were strong enough for the case to be settled out of court with the sonreceiving an appropriate share of the estate.  We can advise you on any potentially contentious issues in the terms of your will orregarding an estate from which you believe you should benefit.

Posted by Peter Nicholas on Thursday, April 05, 2012 at 11:32 AM