In Australia and New Zealand it is commonplace for claims to be served via Facebook, and whilst it has been known in a number of claims in England and Wales in the past, these have been county court claims and hence the practice has not been approved at such a high level.

It is anticipated that the ruling by Mr Justice Teare will set a new precedent and the service of claims by such means will become a regular and accepted form of service.

Background Facts

The claim in question had a value of $2.1m (£1.3m).  It was brought by two investment managers, AKO Capital LLP and AKO Master Fund against their broker, TFS Derivatives.

The claimants claim was that TFS had overcharged commission which they were seeking to recover, a claim which TFS denied, but claimed that if they were found liable then they should be able to recover some of the funds from Mr Fabio de Biase, an employee of TFS Derivatives, and Anjam Ahmad who was an ex-employee of AKO Capital LLP.

Mr de Baise and Mr Ahmad were joined into the action as 2^nd and 3^rd Defendants.

TFS served its claim against Mr de Baise at his last known address, but because they held doubts over whether it was his current abode, they petitioned the court to be allowed to serve the claim by Facebook as well.

Mr Justice Teare was concerned with some of the practicalities of service by this method.  There is clearly the question of when service takes effect; is the account accessed regularly; can this be proven; did the account indeed belong to the correct defendant.

TFS were able to show that the Facebook account in question belonged to the correct Mr de Baise as he was ‘friends’ with a number of TFS colleagues, and the account was still in use because it could be shown that recent new ‘friend requests’ had been accepted. 

Accordingly Mr Justice Teare granted the request.

Comment

Mr Justice Lewison had allowed an injunction to be served by Twitter because the defendant in that case was not known by any other name than his Twitter name, and as I said earlier, legal claims in lower courts have been served by a Facebook posting.

As a result, it could be argued that the decision of Mr Justice Teare is nothing new. The point is however, that this decision comes at such a high level within the legal system that it is to be taken as a nod by the establishment to the importance of social networking.  It is also a significant move away from the traditional methods of service and show how the judiciary are open to embracing change.

The guidance applies to high street and online estate agents, property auctioneers, buyers’ agents, and solicitors and online property sites which offer services that count as estate agency work.

The new guidance focuses on two important pieces of legislation: (1) the Consumer Protection from Unfair Trading Regulations 2008, which prohibit traders/estate agents from engaging in commercial practices that are unfair to sellers, buyers, potential sellers and potential buyers of residential property, and (2) the Business Protection from Misleading Marketing Regulations 2008, which prohibit traders/estate agents from using misleading marketing when they advertise services to potential business clients or market commercial property for sale.

The draft guidance seeks to clarify how these two Regulations apply to estate agency work. It contains examples of trading practices that could breach the Regulations, and offers practical steps that businesses can take to comply with the law when they do any of the following:

1. advertise for new business, including through flyers, websites, newspaper advertisements and verbal discussions;

2. provide advice to new clients and take new instructions;

3. market properties, including when property details are put on the Internet;

4. negotiate and make sales; and

5. deal with complaints.

Currently, if you are convicted of committing a criminal offence under the CPRs or BPRs, you could face a fine not exceeding the statutory maximum , which is £5,000 (if convicted in the Magistrates Court), or an unlimited fine and/or imprisonment for up to two years (if convicted on indictment in the Crown Court.)

Also, under the Estate Agents Act 1979, if the OFT deems a business to be unfit to engage in estate agency work, it can issue a prohibition order banning the business from doing so.

The deadline for responding to the consultation is 9 December 2011. After this date, the OFT will publish its final guidance and a summary of the responses received.

Last month, the French government proposed to introduce a new tax on non-residents who own a holiday home in France that they do not rent out as a long-term let. The government estimated that the total revenue from this tax would have been EURO 176 million a year, with the money used to fund proposed reform of the French wealth tax system.

However, after facing opposition from a group of senators representing French nationals living abroad, the government confirmed it was abandoning the proposal, as the new tax would have been incomprehensible to overseas French nationals.

The claim for contempt was brought by the woman with whom Goodwin was alleged to have had an affair. ANL had published a pixellated photograph of the woman in The Daily Mail, and she claimed that, together with the information contained in the accompanying article, she could be identified, which was in breach of the anonymity order previously made by the High Court. The article also contained a number of statements relating to the applicant that were alleged to be false. The applicant claimed that the article and picture clearly broke the terms of the anonymity order granted to protect her.

The High Court ruled that the effect of the false information was that it might lead the public to believe that disclosing the identity of the applicant would be in the public interest. However, the High Court stated that it did not believe that a referral to the Attorney General would actually assist the Attorney General. The High Court did not refer the case to the Attorney General, but added that the applicant was free to make the referral herself.

In fact, the Lord Chief Justice’s warning seems to have come too late. In August 2010, Joanne Fraill was a juror in a drugs trial in Manchester. Jamie Sewart was a defendant in that trial who had been acquitted, but the trial was ongoing whilst the jury considered charges against other defendants when Fraill contacted Sewart on Facebook and had a chat online about the trial.

Sewart’s lawyers informed the court about the contact the following day and the case collapsed, with the jury being discharged. The chat included the disclosure by Fraill of details of the jury’s deliberations. Fraill had also looked up another defendant online and researched their background. Both actions went against the judge’s instructions in the trial that jurors should make their decision based solely on the evidence brought in court.

The Attorney General filed brought a case in the High Court against the pair for contempt of court.  Sewart has avoided a custodial sentence but Fraill has been sentenced to eight months in prison.  She was devastated when she found out, but anyone not abiding by the rules of the court should be warned.

The amendments include:

- no longer having to state whether the company was a traded company at any time during the return period;

- when describing a company’s principal business activity, the classification scheme that companies may use is the 2007 edition of the UK Standard Industrial Classification of Economic Activities (rather than the 2003 edition); and

- requiring the annual return to state whether any of the company’s shares were, at any time during the return period, admitted to trading on a “relevant market” which, for example, would include the London Stock Exchange’s main market, AIM and regulated markets outside the UK.

The regulations setting out these amendments are currently in draft form but it is intended that they will come into force on 1 October 2011 and apply to returns made up to that date or a later date.

Or unless you are me.

So on to the news:

1.         DV3 v HMRC

This was the tax planning case I’ve referred to in previous posts.  The taxpayer appealed against HMRC’s assessment that stamp duty land tax (SDLT) planning (involving the sale to a purchaser followed by a subsale into a partnership) failed.

The decision was highly technical and involved an in-depth analysis of the SDLT subsale rules. 

The taxpayer won in the tribunal.  It seems likely that HMRC will, however, appeal.

2.         Shariah compliant SDLT scheme blocked

In the budget, HMRC have changed the rules for subsales and alternative property finance relief to block an increasingly popular method for avoiding SDLT.

3.         5% rate

The rate of SDLT for residential property purchases OVER £1m with an effective date on or after 6 April will increase to 5%.  Following on from the above 2 points, this is likely to lead to an increase in SDLT planning.

4.         Bulk purchases

As from Royal Assent of the Finance Act 2011 a new relief will be introduced for purchases for multiple residential properties.  The terms are not yet finalised, but in essence where you are purchasing several plots or properties you would take the total price and divide by the number of properties to find the mean.  The rate of tax will be based on the mean price.

Since opportunities for abuse abound, there will probably be some restrictions imposed.

5.         First time buyers

HMRC will review how this relief is working and report on it in the Autumn.

If any of these changes affect you or if you would like to contact someone about stamp duty, please drop me a line.

Anyway, this post is about a different kind of dog…a…wait for it….hot dog.  Sorry, sorry, sorry.

Anyway, the point of this blog is that Manfred Bog, who specialised in selling sausages and chips from three mobile snack bars at weekly markets, won a ruling from the European Court of Justice that he did not have to charge the full rate of VAT.

The court’s reasoning was that his sausages required so little preparation that they did not constitute catering. It found the same rules should apply to popcorn and nachos sold in German cinemas.

VAT is a EU tax, so the effect of this will spread to the UK.  The implications here will be  that caterers, cinemas, and other hot sausage sellers in the UK will need to ensure that they charge the correct amount of VAT and may need to discuss the implications of the case with their local VAT office.

So, when you are staggering home from your football match, pub or other entertainment venue and you are hungry enough that the sausages on sale by the street vendor start to look edible, remember to ask whether they are charging VAT correctly.  Then run.

On a slightly more serious note, those of you that follow VAT rulings will recall the Subway decision (which went the other way – the court held that VAT was to be charged on the supply of subs).   In that case, there was some discussion on the impact of this on rents.  It is entirely conceivable that purveyors of certain foodstuffs from more fixed premises, might not reduce their charges and therefore pocket the difference.  If this affects profits significantly then there might be scope for landlords to argue that rents should increase in the future, especially if there is a turnover rent.

It is very likely that fashionistas go through the same when column inches get devoted to which shoes go with which handbags and doctors cry into their corn flakes when they read about medicine fads.  However, since I know nothing about fashion (as my wife will confirm) or health (as my Mum will confirm) it just flows over me. 

The story goes that if you purchase property in an overseas company, you can avoid stamp duty.  My comments:

1. For UK resident tax payers buying their homes, they lose out on the capital gains tax relief on the sale of their homes.  They will sell shares and pay tax on the gains.  28% CGT is a lot more bothersome than 4 or 5% stamp tax.

2. It saves stamp duty on the sale but that’s not going to help the company which is purchasing now.

3. This has the potential to make administration a nightmare and there are annual directors fees etc.

4. There can be income tax charges on the use of the property if a market rent is not paid.

5. Most UK based future purchasers won’t want to buy a company so you’ve restricted your ability to market the property in the future.  And if purchasers buy the property from the company - you’ve just wasted time and a shed load of money.

6. If you are borrowing to purchase the property, you’ll have a much harder time and the cost of finance will increase.

etc…..

So who should consider buying a property in a overseas company?

First point – don’t do this without speaking to your tax adviser (or me!).  Second this is mainly of use to wealthy overseas investors.  There is inheritance tax planning which can really benefit from a structure involving an overseas property.  But that’s not stamp tax planning.

What’s funny about the article is that tucked away at the end is a comment from a partner in KPMG with which I mostly agree ” for anyone [other than a overeas investor], it’s a ticking time-bomb”.   If they had spoken to him before writing the article, perhaps they wouldn’t have bothered.

A European Union (EU) Directive allows each EU Member State to designate certain sporting and cultural events for free-to-air broadcast on television for the purposes of national interest. In the UK, this Directive was enacted by the Broadcasting Act 1996.

FIFA and UEFA challenged that law on the basis that it restricted their ability to sell rights to show the tournaments at the most favourable prices, and that it was an infringement of their intellectual property rights and a distortion of competition in the sports broadcast market. They accepted that, in the UK, the matches involving England, Scotland, Wales and Northern Ireland, along with the finals and semi-finals, should continue to be shown on free-to-air television, but they argued that they should have the ability to sell the rights to show other matches to subscription-only television.

The EGC rejected the challenge, and ruled that all of the matches that take place at such tournaments are ‘events of national importance’, making the free-to-air nature of the entire tournament compatible with EU law.

The EGC is the European court where first instance rulings are made, and appeals are made to the European Court of Justice. FIFA and UEFA have two months to appeal.

A ruling in favour of FIFA and UEFA could also affect the broadcast of events such as the Olympic Games and Wimbledon on free-to-air television.

The Supreme Court does not hear cases that involve either jurors or witnesses, and the information that is disclosed in the Supreme Court is rarely subject to any degree of confidentiality. However, certain cases will be subject to stricter reporting restrictions, but in those instances people present in the courtroom will have the restriction made clear to them at the start of any proceedings.

Skilled workers from overseas who do not take home big salaries will have to satisfy strict criteria.  Fewer than 21,000 a year will be let in because of a new cap on the number of people coming to the UK for employment.

Applicants will need a “certificate of sponsorship” from a UK employer and they will be given points according to the rarity of their skills, for example scientists will be ranked highly. Employers filling a vacancy that attracts a salary of £150,000 or more will not be subject to the limit on the number of certificates that may be allocated.

For more information on this change, the press release can be seen here.

Looking at the bigger picture, the Government is sending out mixed messages.  On one hand, this will be welcomed by business leaders who are concerned about a brain drain from the UK.  This is clearly intended to encourage skilled immigration and to support both the knowledge based economy as well as the City.  On the other hand, HM Treasury have raised tax to 50% on the highest earners with hints from the Chancellor that the beneficial tax regime in the UK for resident non-domiciliaries (who will be the ones most interested in the above announcement) may be restricted. In an increasingly mobile global society, there are simply too many other choices and, put simply, tax is a large part of the equation when choosing where to live.

The Government needs to have a clear policy to increase the skill set (and therefore the wealth) of the UK through targeted and consistent measures.  It is not enough to simply fiddle with immigration quotas.

It’s common sense really – don’t act until you are in full possession of all the facts.  The following is a tale of woe that shows what can go wrong if you don’t.

As was reported in accountingWeb, a Sunderland based accountant is facing prison time after being found guilty of tipping off a client about a police investigation.  The accountant received a police order demanding him to hand over some accounts.  Rather than reading the order to determine what this was about, the accountant read the first couple of paragraphs and then immediately telephoned his client to let him know that he was being investigated.

The court held that this was in breach of the Proceeds of Crime Act with the possibility that he will now face a custodial sentence.

This takes me back to school and an early experience with exams.  As my teacher told me then – don’t do anything until you’ve read the full question!  Sometimes the early lessons we learn are the most important.

Tipping off is a serious issue and is one faced by many professionals, in particular those dealing with Money laundering compliance.  It is imperative to understand your obligations under these rules, and as cases like this make all too clear:  ignorance is no defence.

HMRC will target 50,000 SME’s a year looking at business records going back over the last 6 years.  There is a legal obligation to keep adequate records, and failure to do so can give rise to fines of up to £3,000.  This is a change of practice from HMRC who historically have rarely imposed these penalties.

Overtly raising taxes at the moment is political death.  So HM Treasury have to look elsewhere for money.  This seems to be a case of rummaging down the back of the sofa for those extra bits of revenue.  However, for most SMEs – £3,000 is not small change.  Businesses need to ensure that they keep all relevant documentation in addition to their accounts, such as till rolls, cheque stubs, paying-in-slips, cash receipts, etc.

If you want to speak to a solicitor or accountant about your obligations please contact us.

We also offer a business healthcheck  service, which includes a review of your business documentation and compliance.  If you are interested in this please contact our corporate team.

The Office of Fair Trading (OFT) launched an investigation in January 2005 into allegations of collusion between producers of dairy products and supermarkets in relation to retail pricing. In September 2007 the OFT informed a number of businesses, including Tesco, Sainsbury, Asda, Morrisons and Safeway (which was bought by Morrisons in 2004), that the OFT had found evidence of their involvement in collusion that infringed Chapter I of the Competition Act 1998. Chapter I of the Competition Act 1998 prohibits an agreement, decision or concerted practice between undertakings which may affect trade in the UK (or part of the UK) and has as its object or effect the restriction, prevention or distortion of competition within the UK.

The OFT reached early resolution agreements with many of those accused, under which those businesses admitted that they had been involved in collusion, accepted liability and any fine imposed by the OFT, and agreed to assist the OFT in the continued investigation. Under the early resolution agreement, Safeway agreed to pay a fine of more than £10 million, which had been reduced from £16 million under the terms of the agreement.

A number of companies within the Safeway ‘group’ filed proceedings in order to recover damages from former directors and other former employees, and hoped to obtain an indemnity against the costs of the OFT investigation and fine. Safeway argued that those former employees had breached their contracts of employment, had breached fiduciary duties they owed to Safeway, and had been negligent.

The defendants applied to the court for a summary judgment or to have the claim struck out on the grounds that, firstly, the claim went against the principle of ‘ex turpi causa – that a claimant cannot pursue an action if it arises in connection with the claimant’s own wrongdoing, and a court will not assist a claimant seeking to recover a benefit from that wrongdoing – and, secondly, that the claim went against the Competition Act 1998 and accompanying competition regime.

The High Court ruled that the case should proceed to trial on the grounds that Safeway had a real prospect of defeating any defence brought by the defendants based on the ‘ex turpi causa’ principle as Safeway’s liability was arguably not personal, primary or direct, and it was possible that the defendants had been the ‘directing mind and will’ of Safeway at the time of the breach. The High Court also ruled that moving the fine from Safeway to the former employees at fault was consistent with the competition law regime under the Competition Act 1998. The High Court therefore ruled that the case should proceed to trial for a more thorough consideration of the facts. The defendants appealed the ruling.

The Court of Appeal ruled in December 2010 that the appeal should be allowed, and that the defendants were entitled to summary judgment such that Safeway’s claims were struck out. In a unanimous verdict, the Court of Appeal ruled that the ‘ex turpi causa’ principle did apply, such that Safeway could not recover the amount of the fine due to the OFT from its former employees alleged to be at fault for the breach of competition law. The Court of Appeal ruled that Safeway’s liability was personal and could not be passed to its employees, and that the aim of the Competition Act 1998 is to protect consumers, and the general public, from distorting trade practices, which would be undermined if a company could then pass on any liability to individual employees.

The High Court had arguably put directors at risk of huge financial liabilities if their companies infringed competition law. However, the ruling of the Court of Appeal ensured that directors are no longer at personal risk under competition law, and clearly states that the competition law regime imposed by the Competition Act 1998 places liability on companies themselves, and that such liability must remain personal to those companies and not passed on to employees past or present, even if those employees were at fault for the infringement.

The full text of the ruling can be found here.

The lower rate of corporation tax has a threshold of £300,000.  If you have two associated companies the threshold for each is reduced to £150,000.  If you have three, then the threshold reduces to £100,000 for each.  The same will apply to the upper threshold (£1.5m).

The case below shows how this rule can apply in quite unexpected ways.

Executive Benefit Services (UK) Limited v HMRC [2010] UKFTT 550 (TC).

The taxpayer company and its associated company had completely distinct businesses.  However, a shareholder of one was found to control both companies since he had become a loan creditor of the associated company for purely commercial reasons.  Essentially by virtue of lending the other company money (combines with a minority shareholding) he became entitled to the “greater part” of the company’s assets “available for distribution to participators”.

The First-tier Tribunal held that the associated company test applied irrespective of any tax avoidance motive in structuring a company’s financing and shareholdings. 

Conclusion

This is a good reminder of some of the mischief which can be caused by the associated companies rules. 

The facts here are clear that there was no tax avoidance motive, in fact the shareholder in question was clearly trying to help out his son (who was the owner of the second company).  The loan was interest-free with no fixed repayment date and with no other entitlements, such as voting control or a share of a distribution of profits in the event of a winding-up.  Despite all this, the tribunal held that the companies were associated and reduced the rate of tax for both companies accordingly.

This case is going to be of particular interest in these times when (as happened here) lenders are holding back the flow of credit and children are turning to the bank of Mum and Dad.  When Mum and Dad are themselves in business, they need to look very carefully at the position of both companies.

For more information please contact James Odds or Shimon Shaw on 01923 20 20 20.

HMRC v Airtours Holiday Transport Ltd [2010] UKUT 404 (TCC)

A large holiday company (My Travel Group) suffered financial difficulties, and arranged for PwC to liaise on its behalf with its banks, bondholders and other creditors.  The company reclaimed input VAT in respect of these services.

HMRC issued assessments to recover the tax, on the basis that the supplies had actually been made to the company’s creditors, rather than to the company itself.   Their contention was that since the company had not recevied the supplies (even though they had paid for them) the company would not not be able to recover VAT.  Since the creditors had not paid for the supplies they also could not recover the VAT.

The First-Tier Tribunal allowed the company’s appeal but the Upper Tribunal reversed this decision and found in favour of HMRC.

Comment

This case seems to be a victory for the taxman but a loss for professional advisers and struggling businesses.  Since VAT will be paid but not recovered this will make professional fees that much more expensive.

In light of this decision, professional advisers should assess their letters of engagement and billing arrangements to determine who, in truth their client is.

If you would like to discuss this with anyone please contact me or Carolyn Jones (in our Banking and Finance team) on 01923 202020.

Scott Charney has compared the computer virus with public health warnings, under which certain people are quarantined to prevent the spread of a disease. He suggested that, in order to protect users from networks of infected computers under the control of cyber criminals, infected computers should be put in quarantine to prevent the spreading of a virus.

Such infected networks are known as botnets. When computers become infected with a virus, usually from an email attached or software download, it becomes part of the wider infected network. The network is then effectively leased out by those controlling it, to allow others to use it for circulating spam or attacking websites.

He suggested that, before connecting to the Internet, each computer should need to produce a health certificate to prove that it is uninfected. If the certificate cannot certify this, then the computer would need to download certain updates to upgrade its anti-virus settings. He also said that users should not be cut off entirely, but that further discussions would need to take place if his suggestion was taken up to allow flexibility for users who find viruses on their machines.

It’s all very well in theory, but is it fair to impact on and effectively punish the unsuspecting user whose computer has been hijacked? The debate will obviously rumble on…

See the full text of Scott Charney’s proposals at http://www.microsoft.com/downloads/en/details.aspx?FamilyID=062754CC-BE0E-4BAB-A181-077447F66877&amp%3Bdisplaylang=en

The claimant provided distance learning courses, and the defendant ran a website which hosted bulletin boards and forums. The claimant had proved that the courses in question were genuine and legitimate, and therefore the claims made in the postings were false. When asked to remove the postings, the defendant refused to do so. The court had already awarded judgment in default to the claimant.

The court now had to rule on the damages issue. The defendant’s website had a large number of visitors (about two million unique visits per month) and it had refused to remove the offending material. The claimant was not able to show loss of specific business but it had a number of questions from students as to the allegations. The applicable level of damages in this case was set at £50,000 to represent the amount that the claimant required to vindicate its reputation and demonstrate that the postings were false.

Mr Justice Tugenhadt ruled in the High Court that an injunction be imposed to prevent the disclosure of information by the applicant’s ex-wife. She had claimed that she had had a sexual relationship with the applicant after he had remarried, and she had leaked certain details to a newspaper. An interim injunction and anonymity order had previously been granted by the court, in relation both to the respondent and the newspaper in question. The applicant also claimed that he had been blackmailed by his ex-wife, with the threat that more information would be disclosed if the applicant did not pay her a sum of money.

The ruling stated that there was credible and uncontradicted evidence that the respondent had threatened to disclose information about the applicant’s private life which the public had no right to know and the respondent had no right to publish or disclose. Damages would not be an adequate remedy, specifically in relation to the effect that such disclosure might have on the applicant’s private life, and others whose private lives would be affected. It was also ruled that the applicant was likely to establish at trial that the disclosure should not be allowed.

The anonymity order was also granted on the basis that the TV star’s privacy rights under article 8 of the European Convention on Human Rights (which were also in the public interest by preventing and punishing blackmail) outweighed the free speech rights of the ex-wife under article 10. The Convention forms part of English law through the Human Rights Act 1998.

As for the facts of the case itself, provided the anonymity is retained, it sounds like it would make a good plot for a television drama. Presumably, though, the applicant in this case would not be interested in playing the lead male role!

Pedro Cruz Villalon stated that, in principle, a prohibition issued by a national court in relation to a European Community Trade Mark had effect throughout the EU. He qualified his opinion to the extent that the decision would only have effect in other countries where there was actual or threatened infringement. However, the national court producing the decision could only enforce breach of the decision within that nation. Breaches in another country would have to be enforced by the national court of that particular country.

Advocates General provide guidance to the ECJ by producing opinions. The ECJ is not under any obligation to follow the views expressed in the opinions, but tends to do so. We therefore await the final decision of the ECJ, but if followed this ruling would significantly simplify and cheapen the cost of enforcing trade mark rights around the EU. For more on the Advocate General’s opinion, click here: http://curia.europa.eu/jcms/upload/docs/application/pdf/2010-10/cp100100en.pdf.

The Court of Appeal was asked by Prudential, the insurer, to consider whether legal advice given by non-lawyers was protected by legal professional privilege. The High Court had already ruled that it could not, so Prudential appealed the decision. Legal professional privilege is the right for clients to have their discussions with lawyers kept secret without having to disclose it in court proceedings. There are exceptions to this rule.

The Court of Appeal upheld the High Court ruling, and said that the current law simply did not allow legal professional privilege to extend to accountants. The Court of Appeal agreed that it would be reasonable if it did, but that changing the law was the job of Parliament rather than the courts.

It is an important point to remember when using in-house counsel or non-lawyers to provide legal advice. If you want that advice to remain secret by law, use a lawyer.

If you miss the deadline it could be costly, as paper returns filed after this date could mean a £100 penalty.

An alternative to paper-filing is to file your return online, which benefits from a January deadline.

If you would like assistance in preparing and filing your tax returns, please contact James Odds on 01923 202020 or james.odds@mablaw.com.

The Treasury have just now issused the following press release, which we will consider in more detail and comment on in due course.

Financial Secretary to the Treasury announces changes to restricting pensions tax relief

Financial Secretary to the Treasury, Mark Hoban MP, announced today that the annual allowance for tax-privileged pension saving will be reduced from £255,000 to £50,000, and the lifetime allowance will be reduced from £1.8 million to £1.5 million. This will replace the complex proposal legislated for by the last Government in the Finance Act 2010.

This measure will raise £4 billion per annum in steady state and will help reduce the record Budget deficit that this Government inherited. It will be targeted at those who make the most significant pension savings. An annual allowance of £50,000 will affect 100,000 pension savers 80% of those will have incomes over £100,000.

The Government is committed to protecting individuals on low and moderate incomes as far as possible. To protect individuals who exceed the annual allowance due to one-off “spikes” in accrual, the Government will allow individuals to offset this against unused allowance from previous years.

We will also consult on options enabling people to meet tax charges out of their pensions in November.

In order to protect the public finances it is necessary to introduce the reduced annual allowance from April 2011. The Government plans to introduce the reduction in the lifetime allowance from April 2012.

Mark Hoban said:

We have abandoned the previous Government’s complex proposals and developed a solution that will help to tackle the deficit but not hit those on low and moderate incomes. We have taken a tough but fair decision.

The Coalition Government believes that our system is fair, will preserve incentives to save and – compared to the last Government’s approach – will help UK businesses to attract and retain talent.

A statutory will is a will made on behalf of someone who lacks the necessary capacity to do so themselves by application to the Court of Protection.

In the case of Re D (statutory will), the Court of Protection considered what principles should be applied in determining whether to order the execution of a statutory will for and on behalf of a person who lacked the mental testamentary capacity to do so.

The Court of Protection held that under the Mental Capacity Act it can authorise a statutory will on the grounds that the validity of an earlier will is in dispute.  Decisions taken on behalf of a mentally incapacitated adult must be taken in his or her best interests.  This can include being remembered for having done the ‘right thing’ in his or her will.  In this case the judge ruled that the ‘right thing’ meant ensuring Mrs D’s memory was not ‘tainted by the bitterness of a contested probate dispute between her children’.

Comment

It is heartening to see the Court taking such a practical (and sensitive) approach.  The alternative would have been for the beneficiaries to have waited until Mrs D had died and to then contest her will in the courts.  This would have been far more stressful and expensive and would almost certainly not have been what Mrs D would have wanted.

If you would like advice on statutory wills or mental capacity please contact me on iain.donaldson@mablaw.com or 01923 202020.

In Akzo Nobel Chemicals Ltd And Akcros Chemicals Ltd V European Commission Advocate General Juliane Kokott confirmed that confidential communications between companies and their in-house lawyers should not, in Commission investigations, attract the same professional privilege as communications between companies and outside counsel.

Privilege will only attach to communications with independent external lawyers in relation to clients’ rights of defence.  The position under EC law is therefore different from that throughout the UK where privilege attaches to internal client communications with internal lawyers in the same way as communications with external lawyers.

The reason given by the European court is that in-house lawyers are not fully independent of the company in which they work. Although presently there remains a distinction between the common law and other jurisdictions, the danger is that this decision opens the floodgates and that all communications between a company and its in-house legal team may be under threat of exposure in the event of subsequent proceedings.

Tim Constable comments: It is not clear how far-reaching this decision will prove to be, but for in-house counsel the safety play for more sensitive legal communications could be to copy in external legal advisers from the start to ensure that privilege and confidentiality are maintained.

Two sisters had each made a will in 1991.  They had made mutual promises to each other and as part of that had agreed that the will of the survivor would not be altered so as to change those gifts.  The surviving sister did, in fact, alter her will in 2003 and the persons who would have been the beneficiaries under the surviving sister’s original will went to court (after her death) to ask the court to give effect to the 1991 will.

Neither of the wills contained any record that they had been made pursuant to an agreement between the sisters but it was apparent from the provisions of the wills that the terms had been carefully discussed and agreed.  The court was asked to apply the doctrine of mutual wills.

The court ruled that for the doctrine of mutual wills to apply there had to be what amounted to a contract between the sisters that both wills would be irrevocable and remain unaltered.  A common intention, expectation or desire was not enough.  The mere execution of mirror or reciprocal wills did not imply any agreement either as to revocation or non-revocation.  The agreement had to be established by clear and satisfactory evidence on the balance of probabilities.

In the light of the evidence, there had been an agreement between the sisters at the time they had made their 1991 wills.  They had made mutual promises to each other and it was part of those promises that the will of the survivor would not be altered so as to change those gifts.

This case, once again, highlights the importance of proper and qualified legal advice when drafting wills.  None of this would have been necessary if the sisters advisers had ascertained their intentions as to revocation, advised as to the effect of making mutual wills and ensured that any agreement they wished to make was clearly and accurately recorded.

If you want to speak to someone about making a will please contact Suki Sandhu or Emma Alford on 01923 202020 or email info@mablaw.com.

If you have a concern about your entitlement under someone else’s will please contact Amanda Melton on 01923 202020 or amanda.melton@mablaw.com.

A will is one of the most important documents you will ever write, so it is important to ensure that it is done properly.

Tonight’s Panorama on BBC 1 at 8:30 has a look at some of the issues involved with getting a will drafted and some of the pitfalls.  According to the report on this morning’s Today programme on Radio 4, will writers and banks get rather pummelled whilst the legal profession comes out on top.

The reasons for this are clear.  It boils down to professional standards. 

Customers of will writers and banks are enticed by slightly lower fees but often find themselves encouraged (and in some cases pressured) into appointing the will writers or the bank as executors without being fully informed of what this means in terms of fees (which can amount to about 4% of the estate).  Customers are often then charged to have their wills stored.  To add insult to injury the advice in preparing the will is not always correct with no legal redress against the will writers.

How can this happen?  Simply put, the will writing industry is unregulated and anyone with a PC and a desk can make themselves a will writer. 

Solicitors, conversely, are regulated by the Law Society and the Solicitors Regulation Authority.  We have a code of conduct which places the client first.   Whilst not all solicitors are experts in trusts and inheritance tax, one must have a certain level of expertise and training to be admitted as a solicitor.

I’m not saying that the legal profession is perfect.  There is a diverse range of solicitors from sole practitioners on the high street to the multi-nationals in the city.  But what using a solicitor offers is the security of a skilled professional, putting your interests first, backed up by the guarantee of insurance should something go wrong.  Because of this costs are sometimes higher, but at the end of the day you know what you are getting.

Matthew Arnold & Baldwin LLP does have a dedicated team of Wealth Management specialists with expertise in wills, tax, trusts and probate.

If you would like to speak to someone about making a will, please contact Suki Sandhu or Emma Alford on 01923 202020, or email info@mablaw.co.uk.

The case involved a deed of variation, which changed the terms of a will.  By way of background, it is possible for the effect of a will to be varied within two years of death, provided that various conditions are met, including the agreement of the affected beneficiaries.  In many cases wills are varied for tax reasons.

In the present case £10,000 plus some farmland of the £1.7m estate was to pass to the deceased’s husband and the rest was to pass to the deceased’s children.  The husband’s accountant suggested that the effect of the will should be varied to make it more tax efficient and a deed of variation was executed.  This was defective and led to an additional £33,000 of inheritance tax.  The parties attempted to rectify the deed of variation to the effect that the husband would not be liable to pay inheritance tax.  HMRC refused to accept the efficacy of the deed of rectification for tax purposes.  The claimant applied to the court seeking approval of the deed of rectification.

The court found in favour of the husband and allowed the deed of rectification.  The judge distinguished between a mistake as to the fiscal effect of the deed of variation and the document not giving effect to the true agreement or arrangement between the parties.  The court would not order rectification of a document if the parties’ rights would be unaffected, and if the only effect of the order would be to secure a fiscal benefit for one or more of them.  On the other hand, where the  mistake was as to the meaning or effect of a document, this might be amenable to rectification.

In many ways this case highlights just how flexible our legal system is.  The parties were not only able to amend the will, but when they got this wrong, they were then able to correct this mistake to give effect to their true intentions.

The case also highlights two other things.  First is the need for proper will planning – for if the deceased had received the correct advice while alive none of this would have needed to happen.  The other is the power of deeds of variation to create a much more favourable outcome for the beneficiaries.

If you would like to discuss any of the points raised here, please contact our Wealth Management team on 01923 202020.

Berkeley Wodehouse Associates, a partnership, operated through a network of independent financial advisors. Mr Shaw provided services to BWA under BWA’s standard form of contract for IFA’s (“IFA Contract”). Under the IFA Contract, Mr Shaw had agreed to indemnify BWA in respect of any costs, charges and expenses, including any excess, charged by BWA’s PI insurers in connection with his provision of services. Mr Shaw resigned and BWA subsequently sold its business to Lighthousexpress Ltd. One of the assets transferred under the sale by BWA to Lighthousexpress was the benefit of BWA’s current contracts. Lighthousexpress was later required to compensate a former client of the BWA business who had been advised by Mr Shaw. Lighthousexpress then sought to rely on the indemnity to recover this compensation (which fell within the excess) from Mr Shaw.

The general rule is that, in the absence of a prohibition on its assignment, an assignee may enforce the terms of a contract unless it is intended to be personal to the assignor. Notably the Court found, in this case, that there was no reason why, on its true construction, the right of the indemnity should be personal to BWA and so not be assignable. In particular, there was always the possibility that the partners of BWA would change or the BWA business would be transferred to a third party and so there was no reason for the indemnity to remain frozen in favour of the partners of BWA as at the date that the indemnity was given.

The Court also considered whether a provision in the business sale agreement between BWA and Lighthousexpress purporting to assign the benefit of the “current contracts” of BWA was effective to assign the benefit of the indemnity in an agreement which had already been terminated. The Court found that the indemnity in the IFA Contract continued in effect following its termination and therefore the IFA Contract remained alive so far as the indemnity clause was concerned. This being the case the Court construed the term “current contracts” used in the business sale agreement widely so as to include live contractual obligations owed to or by BWA.

Unfortunately for Lighthousexpress, its claim ultimately failed because the Court found that a limitation clause in the IFA Contract meant that its claim was out of time. However, the case raises two important points. Firstly, those providing an indemnity should decide whether or not they wish to expressly exclude the ability of the recipient to assign the benefit of that indemnity. Secondly, parties entering into a business sale agreement should make clear whether the assignment of the benefit of the contracts of the business includes those rights surviving under contracts which have already terminated.

Background

A court has ruled as a preliminary issue that where a partnership deed is silent as to the basis of valuation for the purpose of determining the amounts payable to outgoing partners, such amounts have to reflect a fair value of the partnership’s assets and cannot be based on historical annual accounts which greatly underestimate the value of the partnership’s main asset which, in this case, was land.

Facts

The partnership deed provided that when a partner retired, died, became bankrupt or became a patient under the mental health legislation, his share in the assets of the partnership would accrue to the surviving partners in the same proportions as their respective shares in the partnership property, and the outgoing partner (or his personal representative) would be paid the amounts standing to his credit as his share in the capital of the partnership and as undrawn profits belonging to him in the “last annual general account prior to his retirement, death or bankruptcy or becoming a patient”.  However, no accounts had been agreed for any of the relevant years.

Decision

The court held that the outgoing partners were entitled to a “fair value” which was the market value of the land in question unless there was an agreement to the contrary, or there were other factors rendering such a value unfair. 

Comment

In the circumstances, the court decided in favour of the outgoing partners receiving a “fair value” but the case is nonetheless an important reminder that it is best to include clear valuation provisions in any partnership deed and ensure that proper and up-to-date accounts are kept so as to avoid the extra expense and stress of a court application at the time of determining an outgoing partner’s share.

Drake v Harvey & Ors [2010] EWHC 1446 (Ch) ]]> http://www.mablaw.com/2010/06/valuation-of-partnership-assets/feed/ 0 http://www.mablaw.com/2010/06/boundaries-financial-ruin-v-compromise/ http://www.mablaw.com/2010/06/boundaries-financial-ruin-v-compromise/#comments Tue, 01 Jun 2010 10:21:17 +0000 Faiza Ahmad http://www.mablaw.com/?p=3672 £30,000, £40,000, £75,000, £100,000 – significant amounts of money? Yes and these are all examples of the legal costs people across the country have recently spent on fighting boundary disputes with their neighbours. Would you spend £60,000 fighting your neighbour in Court over the colour they chose to paint their garden railings? Neighbour disputes can quickly escalate. Such a case ended up in the Court of Appeal last month and left one party a reported £60,000 poorer because they wanted garden railings to painted blue rather than black.  A simple search on the internet reveals the reality of neighbours, who once lived in harmony, fighting tooth and nail, reaching the Court of Appeal , fighting over small strips of land which in monetary terms are often worth very little. Even more alarmingly, there was a report last month that Police are investigating a fatal stabbing which it is claimed was caused by a dispute between neighbours over a fence.

Legal costs in dealing with and fighting boundary disputes are notoriously out of line with the monetary value of the issues in dispute and the effect on neighbour relations and stress high. “Principles” take over and costs mount to £1000s before you know it.  The alternative  is for the parties to try to resolve matters by agreeing terms with eachother on the best terms possible for both parties. There might be no winner and no loser, but a solution which both parties can live with without incurring huge costs and without further souring relations.

Alternative dispute resolution can help at the outset once solicitors are involved. Parties coming together on site with a mediator and solicitors can often focus the parties’ minds on the reality of the situation. On site resolution seems the most sensible and cost effective method of dealing with such a dispute rather than lengthy correspondence, compliance with Court procedure, the associated costs and growing animosity.  A day long mediation will be money well spent  if not to resolve matters entirely then to at least narrow down the issues remaining in dispute.  If matters cannot be resolved at such a meeting, then the parties can decide whether or not they wish to litigate and proceed with litigation but should be fully aware of the potential costs liability they may incur. This is not to say neighbours who wish to fight a boundary dispute should not, nor does it trivialise the importance of issues relating to someone’s property. It can be a commercial approach to dealing with what is otherwise an expensive and emotionally exhausting experience.

Landlords of residential properties where the annual rent is more than £25,000 are not currently required to register a tenant’s deposit with a tenancy deposit scheme but they will  need to protect that deposit before 1 October 2010. Failure to do so will result in a Landlord falling foul of the requirement to protect a tenant’s deposit in accordance with the provisions of the Housing Act 2004, leaving them open to a claim by a tenant for failing to register the deposit.

For tenants this change means greater protection as they will be afforded the rights granted to them under the Housing Act 1988. Landlords face potential claims against them for failing to register a tenant’s deposit. The change will of course impact Landlords with expensive properties in London where rents are higher than the rest of the country as well as Landlords of larger properties which are occupied by multiple tenants such as student houses where the rent is more likely to exceed the current threshold.

The changes will increase the number of tenancies coming within the Assured Shorthold Tenancy regime which will standardise procedures for Landlords to gain possession and allow use of the accelerated possession route (only open to Landlords of Assured Shorthold Tenancy Agreements).  Landlords who do not and who are required to register a tenant’s deposit will be unable to get possession of a property on a “no fault” basis until the deposit is registered, causing unnecessary delay.

Landlords – review rental levels register your deposits without delay.

Managing Agents – notify your Landlord clients immediately of the impact of this change and the steps they need to take.

We are already seeing cases in the County Courts regarding non-registration of deposits and no doubt Court offices across the country will see further cases next year arising out of these changes.

We’ve had a great discussion on this already click here and thanks for all contributors.

Q1. What is a first time buyer?
A. A person who has not acquired a freehold or leasehold interest in residential property in the UK (except a lease with less than 21 years to run) or an equivalent interest anywhere in the world.

Shimon’s comment: this is going to be hard for the stamp office to police.

The 21 year point also means that if you bought a lease which had been granted to someone else with 21 years or more on it, you won’t qualify. Alternatively, if the lease is granted to you for a term of 21 years of more then you would qualify.

I would query whether a 15 year lease which was extended so that in practice it lasted 21 years would count. Also – it seems unfair that it someone has a business property that they should be caught but seemingly this would be the case.

Q2. When is the relief available?
A. The relief is available for transactions with an effective date on or after 25th March 2010 but before 25th March 2012.

Shimon’s comment: Despite what most people are saying the effective date is not always completion. If you either pay the majority (90%+) of the price or you take possession before completion then this might also be an effective date.

Q3. How do I claim the relief? A. The relief must be claimed on a land transaction return by entering relief code 28 at box 9.

Shimon’s comment: Your solicitor should deal with this.

Q4. I want to buy a house with my partner but one of us has previously owned a residential property. Can we claim the relief? A. No. All of the buyers, when there are more than one, must be a first time buyer.

Shimon’s comment: this is particularly unfair if you have only been on the title to help out a friend or family member. Also when the house will be yours but, say, Mum and Dad help out with the mortgage (and the bank wants them on the title too).

Q5. I previously bought a house jointly with my spouse/partner. The partnership has broken up so can I be treated as a first time buyer?
A. No. Where the individual has previously acquired an interest in a residential property as a joint tenant or a tenant in common the individual is not a first time buyer.

Shimon’s comment: All property ownership will count to exclude you from the relief – even joint ownership.

Q6. Is the relief available on transfers of interests in a home between partners? A. Such a transfer normally requires a transfer from the existing owner to him/herself and the partner. Even if the partner is a First-time buyer the existing owner is not. So the relief is not available.

Shimon’s comment: Depending on the price paid for stamp duty purposes, this is not always an issue. This is a technical area and you should speak to a specialist.

Q7. Can I get relief if I have previously owned an inherited property?
A. No. In this case a person will previously have acquired a major interest in a residential property.

Shimon’s comment: for stamp duty “acquiring” a property includes when it is given to you or when you inherit it.

Q8. Can I claim the relief if I’m buying on behalf of my parents?
A. No. Relief is not available unless the first time buyer(s) are buying, for themselves, a property that they intend to use as their only or main residence.

Shimon’s comment: this is, again, going to be hard to police. It is possible than on an investigation, the stamp office would want to see hard evidence that this was being used as the main residence.

Q9. Is there an age limit on claiming the relief?
A. No. First time buyers can be of any age.

Shimon’s comment: not much to say to this…umm, minors can’t own property in their own names.

Q10. Is there a price limit on claiming the relief? A. Yes, the sum for the whole of the purchase must not exceed £250,000.

Shimon’s comment: this will include when there are multiple purchases. E.g. if you buy two houses each worth £150k from the same person you’d loose out on the relief. Another technical point this, and you should take advice. The technical note HMRC published specifically said that they wouldn’t penalise you for buying connected properties – e.g. a house with a lease over a parking space. But there will be limits to what they accept.

Q11. Can the relief be claimed on shared ownership transactions? A. The relief can be available but only if a market value election is made. The relief is not available if taxed as a lease. Normal shared ownership rules apply on staircasing.

Shimon’s comment: you will need to ensure that your agreements allow you to do this and your solicitor may need to review this. If you have any questions about this please contact Sarah Wilkins in our Milton Keynes office.

Q12. How does the relief apply to alternative finance arrangements? A. Special rules apply to put this form of finance on a level playing field. Under these schemes relief for first time buyers is available for the first purchase by the financial institution, where the person(s) entering into the arrangements meet(s) the qualifying conditions for relief.

Shimon’s comment: this refers to shariah compliance finance arrangements. Under many of these the bank would actually buy the property. Clearly the bank wouldn’t qualify for the relief, but there will be an exeption from the rule for shariah compliant finance.

Q13. Can I claim the relief retrospectively? A. No. Transactions with an effective date before 25th March 2010 do not qualify.

Shimon’s comment: and the relief will continue until midnight on 24 March 2012.

In reaching this conclusion in an otherwise dry case concerning planning law, Dyson J emphasised that “solicitors should not lightly be able to terminate their retainers, leaving their clients with the task of finding fresh solicitors to complete the job” but decided that the solicitor’s right must extend beyond the case “..in which he is instructed to do something improper.”

Lord Dyson went on to say, in words likely to cheer the reasonable advocate (is there such a person?), “In my judgment, if an advocate considers that a point is properly arguable, he should argue it without reservation. If he does not consider it to be properly arguable, he should refuse to argue it.”  How refreshing.

Unsafe deletion of personal data is a breach of the Data Protection Act. In this case, though, the solicitor may face additional consequences. If his clients were already in a litigious frame of mind when they were looking for legal action in respect of the hospital, they may next decide to vent their spleens, so to speak, at their legal advisers!