Page 1

eSmartlegal ENDURING POWERS OF ATTORNEY... NEWS IN BRIEF… AGEISM IN EMPLOYMENT... INHERITANCE TAX…TAXING TIMES...

The Electronic legal magazine

October/November/December 2007

All change for company law wide-ranging reforms Receiving your inheritance…

delays can lead to serious problems

Capital gains tax Your questions answered

Also in this issue

The world’s wackiest laws… don’t get caught out!

Government relaxes the regulations on owning wild animals crime syndicates target residential and commercial property Consumer credit…applying for an enforcement order Pre-Budget Report…main points at a glance

“Non-domiciled” foreigners to face an annual £30,000 charge Chancellor announces proposals to tighten up the rules

PLUS: HOME INFORMATION PACKS... POTENTIAL FINES FOR HOUSE SELLERS…COMPENSATION SCHEME LIMIT INCREASED


Include your own third party advert on this page... and every issue will pay for itself...

Want more information?

Contact Andrew Walcott, Sales and Marketing Manager, telephone +44 (0) 2920 234904 or email drew@goldminepublishing.com


Contents

In this Issue

10 09 12

eSmartlegal - October/November/December 2007

08

05

The world’s wackiest laws… don’t get caught out!

06

All change for company law… wide-ranging reforms

08

Receiving your inheritance… delays can lead to serious problems

09

Enduring Powers of Attorney… law brings new limitations

10

Securing a successful business sale… how to achieve the best available price

12

Pre marriage agreements… protecting against a relationship breakdown

14

News in brief… potential fines for house sellers

14

News in brief… compensation scheme limit increased

14

Ban on hunting with dogs… violation of fundamental human rights

15

A crime to incite hatred on the basis of sexuality… maximum sentence of seven years

15

News in brief… home information packs

16

Speeding up the provision of shareholder information… scope of electronic communications widened

18

Consumer credit… applying for an enforcement order

19

Inheritance tax… couples can now combine their inheritance tax allowances

3


Contents

In this Issue

4

19

News in brief… shake up for the system that appoints judges

20

Ageism in employment… direct and indirect discrimination outlawed

21

Pre-Budget Report… main points at a glance

22

Taxing times… your questions answered

23

Private equity loophole closed… stealth tax introduced on small businesses

24

Capital gains tax… your questions answered

25

“Non-domiciled” foreigners to face an annual £30,000 charge… Chancellor announces proposals to tighten up the rules

26

News in brief… Government relaxes the regulations on owning wild animals

27

News in brief… crime syndicates target residential and commercial property

27

News in brief… four out of five married couples with dependent children don’t have a Will

28

Wedding ceremony fails to stop a former wife from inheriting

29

Crackdown on the high fees for Britain’s mobile phone companies

29

News in brief... New supreme court

27 28

18

15 08

20

25 The articles featured are for your general information and use only and are not intended to address your particular requirements. The articles are based on our understanding as at the 11 October 2007. They should not be relied upon in their entirety. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without appropriate professional advice after a thorough examination of their particular situation. Articles that make reference to the Pre-Budget Report are subject to the Finance Bill becoming law.

eSmartlegal - October/November/December 2007


The world’s wackiest laws

The world’s wackiest laws Don’t get caught out! 1.

T he head of any dead whale found on the British coast is legally the property of the King, the tail on the other hand, belongs to the Queen in case she needs the bones for her corset. 2. In London, it is illegal to flag down a taxi if you have the plague. 3. In Vermont, women must obtain written permission from their husbands to wear false teeth. 4. In Boulder, Colorado, it is illegal to kill a bird within the city limits and also to “own” a pet, the town’s citizens, legally speaking, are merely “pet minders.” 5. In the city of York, it is legal to murder a Scotsman within the ancient city walls, but only if he is carrying a bow and arrow. 6. In Chester, Welshmen are banned from entering the city before sunrise and from staying after sunset. 7. In Kentucky, it is illegal to carry a concealed weapon more than six-feet long. 8. In Florida, unmarried women who parachute on Sundays can be jailed. 9. In the UK, a man who feels compelled to urinate in public can do so only if he aims for his rear wheel and keeps his right hand on his vehicle. 10. In San Salvador, drunk drivers can be punished by death before a firing squad. 11. In London, Freemen are allowed to take a flock of sheep across London Bridge without being charged a toll, they are also allowed to drive geese down Cheapside. 12.  In England, all men over the age of 14 must carry out two hours of longbow practice a day. 13. In Miami, Florida, it is illegal to skateboard in a police station.

14. In Lancashire, no person is permitted after being asked to stop by a constable on the seashore to incite a dog to bark. 15. In the UK, a pregnant woman can legally relieve herself anywhere she wants – even, if she so requests, in a policeman’s helmet. 16. Royal Navy ships that enter the Port of London must provide a barrel of rum to the Constable of the Tower of London. 17. In Ohio, it is against state law to get a fish drunk. 18. In Alabama, it is illegal for a driver to be blindfolded while driving a vehicle. 19. Under the UK’s Tax Avoidance Schemes Regulations 2006, it is illegal not to tell the taxman anything you don’t want him to know, though you don’t have to tell him anything you don’t mind him knowing. 20. In France, it is forbidden to call a pig Napoleon. 21. It is an act of treason to place a postage stamp bearing the British monarch upside down. 22. It is illegal to die in the Houses of Parliament. 23. It is illegal for a cab in the City of London to carry rabid dogs or corpses.

eSmartlegal - October/November/December 2007

Need more information?

Please email or contact us with your enquiry. If you would like us to email a copy of our electronic legal magazine to someone you know, please email us with their details and we’ll send them a copy.

5


All change for company law

All change for company law Wide-ranging reforms The Companies Act 2006 is one of the most significant changes to company law in the last 20 years. The Government’s aim is to simplify company law and make it easier to understand, especially for small businesses. It has been eight years in the making, the Act runs to 1,300 sections and 701 pages. It affects virtually every aspect of how a company is run by introducing wide-ranging reforms with hundreds of changes in the Act. A number of parts of the Act are already in force. They were put on the statute book on November 8, 2006, it is being introduced in stages over two years. The Government intends that it will be fully in force by October 2008. Among the parts of the Act that are already in place are: n c ompanies being able to communicate more easily with shareholders by email and the internet (came into force in January) n transparency obligations requiring listed companies to disclose periodic financial information (January) n the repeal of the obligation on directors and their families to

6

disclose their dealings in the company’s shares, which means that directors of private and public companies need no longer disclose but quoted companies must continue to do so under the regulatory rules to which they are subject (April) n takeovers provisions, which apply to bids for public companies, putting the Takeovers Panel on a statutory footing (April) The Act introduces a statutory statement of directors’ general duties. Currently, there is no definitive single statement of directors’ general duties. Instead, their duties are set out in case law, much of which dates back to the 19th century. That makes it difficult

for first time directors or those from overseas to know what their legal obligations are. In future, directors will, in theory, simply be able to refer to the Act to know what they can and cannot do under company law. One of the Act’s key changes is to set out in one place the seven general duties with which directors must comply: n act within their powers; n promote the success of the company; n exercise independent judgment n exercise reasonable care, skill and diligence n avoid conflicts of interest; n not accept benefits from third parties n declare interests in proposed transactions or arrangements The Government has replaced the obligation to act in the best interests of the company with a new duty to promote the success of the company for the benefit of shareholders. This new duty requires directors to act in the interests of the company’s shareholders but to also have regard to a wide range of specified factors when making decisions, including the likely long-term

consequences of a decision, its impact on the environment, the community, employees, customers and suppliers and so on. It will be easier for shareholders to claim against directors for negligence and breach of directors’ duties. The Act extends shareholders’ current rights to sue directors for wrongs done to the company. Shareholders will be able to sue directors for negligence even where the director concerned has not benefited from his negligence. They will, however, need the court’s permission to do so, and the courts have the power to speedily dismiss unmeritorious claims. Private companies will no longer need to appoint company secretaries. Instead from April 2008, a sole director of a private company will also be able to act as secretary or to outsource the secretary’s duties to a third party. Auditors will be able to limit their liability. From April 2008, provided that the company’s shareholders consent, auditors will be able to sign an agreement with the company limiting their liability. Coupled with the introduction of limited liability, there are also two new offences of knowingly

eSmartlegal - October/November/December 2007


All change for company law

or recklessly including materially misleading information in an audit report or failing to include required information in the audit report.

wishing to enjoy such rights should therefore contact their nominee broker to ensure that it will nominate them.

Investors who are not the registered shareholders but who hold shares through nominee accounts such as ISAs and PEPs will have greater rights, including the right to receive information available to registered shareholders.

The Act will mean deregulation for small businesses. Private companies can take decisions more easily and quickly, without holding formal meetings. Instead, they will be able to take almost all decisions in writing. The only decisions that will still require a meeting to be held are those to remove a director or the company’s auditors. They will also no longer need to hold annual general meetings.

Extended rights for indirect investors to participate in company business by, for instance, requiring the directors to call a meeting or appointing a proxy to attend a meeting, will only apply if a company’s articles of association allow for it, and if the registered shareholder nominates the indirect investor to enjoy these rights. It is an opt-in provision for companies. Indirect investors in listed companies will have greater rights to receive information, such as the company’s annual report and accounts and shareholder notices, irrespective of the relevant company’s articles. The right does, however, depend on the indirect investor having been nominated by the registered shareholder. Indirect investors in listed companies

From April next year, there will be a separate code of accounting and reporting requirements for private companies. From October next year, they will have a special constitutional document, the articles of association, tailored to their needs rather than having to adapt something designed with public companies in mind. It will also be quicker and easier to form a company than currently. And they will be able to give financial assistance for the purchase of their own shares and to reduce their share capital more easily without having to go to court.

eSmartlegal - October/November/December 2007

Companies are able to use electronic means, including email and the internet, to communicate more easily with shareholders. This came into force in January and should result in considerable cost savings for businesses. Provided that shareholders consent, the use of the Internet will be the default position. Individual shareholders can, however, ask that information is sent to them by post. Shareholders’ addresses will only be available on request to the company, rather than freely available. The Act requires anyone who wishes to inspect a company’s shareholder register, including shareholders themselves to obtain the company’s permission and disclose the reason for requesting the information. Companies will have to go to court if they want to refuse a request. Although this provision came into force in October, commencement is being staggered according to individual companies’ annual return dates. A company will be subject to the provisions once it has filed its annual return made up to a date after 30 September 2007, in order to avoid putting a company in the situation

where it is ordered by a court to refuse an access request and then has to file an annual return disclosing full shareholder information. From October 2008, to ensure that the access requirements cannot be circumvented by obtaining shareholder details from a company’s annual return, companies will only need to disclose limited shareholder information in their annual return, with the obligations on private and most public companies being limited to disclosure of shareholder names and shareholdings only.

Need more information? Please email or contact us with your enquiry. If you would like us to email a copy of our electronic legal magazine to someone you know, please email us with their details and we’ll send them a copy.

7


Receiving your inheritance

Receiving your inheritance Delays can lead to serious problems Recent research found that although a third of people expect to receive their inheritance within three months, it can usually anything from six months to three years for probate to be granted, according to Brewin Dolphin, the investment management company. The research also found that nearly 2m Britons who have inherited assets encountered complications that delayed the receipt of bequests. Delays running into years are not uncommon, even if a Will is not challenged by another potential beneficiary. For some people a delayed inheritance can lead to serious problems. Brewin Dolphin’s research found that more than 40 per cent of Britons planned to use their inheritance to help fund their retirement, while more than a quarter of those approaching retirement age have their inheritance money earmarked to pay off debts. Winding up an estate can be a complex process. Before you can apply for grant of probate, which will allow cash and other assets to be distributed to relatives, an inheritance tax (IHT) return must be filed and before this can happen the deceased’s assets must be valued.

granted, there may still be a further delay in distributing assets to beneficiaries. Legacies which are fixed sums or particular assets given in a Will can be distributed as soon as probate has been granted, the residue cannot be handed over until the executor receives clearance from HM Revenue & Customs. This will be given only when the executor has ensured that the deceased’s income and capital gains tax liabilities have been cleared. Delays during probate are often the result of poor estate planning. Delays can often arise when no Will has been written or when it is out of date. A surprisingly high number of Britons, around 70 per cent die intestate.

The executor of the Will, who may be a family member or a professional, should prepare the return, but they will be reliant on third parties, such as banks and insurance companies, to provide them with the information required.

But it is not just the failure to draft a Will that causes problems. Other complications could arise, particularly when there are foreign assets involved. Many Britons who own properties abroad could be affected by this issue. The EU has been consulting on how to harmonise succession law. Not only are there different laws in different member states, but there are entirely different concepts.

The family home, and any other property, will also need to be valued. Once a return has been submitted, the IHT bill must be paid, although payments in respect of property can be made in instalments. Only then can the executor apply for a grant of probate and even once this is

One notable difference is that in Britain we have “freedom of testamentary.” This means you can leave your money to whomever you like, with a few caveats. While there are no simple rules on how to deal with foreign assets, preparation is critical. Unravelling the different laws in order

8

to wind up estates with foreign assets should be thought through in advance. Although in Britain you are largely free to leave your assets to whomever you choose, there are some restrictions. Under the terms of a 1975 Act of Parliament, a Will can be contested if you fail to make reasonable provision for spouses and dependent children. With prior preparation there are a number of things you can do during your lifetime to ensure that you ‘die tidily.’ The most important thing to do is to take professional advice and write a Will. Keeping paperwork in order, making sure your tax affairs are up to date and keeping records of any gifts you might have given are also very important, note that gifts given within seven years of death form part of your estate for IHT purposes.

Need more information?

Please email or contact us with your enquiry. If you would like us to email a copy of our electronic legal magazine to someone you know, please email us with their details and we’ll send them a copy.

eSmartlegal - October/November/December 2007


Enduring Powers of Attorney

Enduring Powers of Attorney Law brings new limitations From October 2007 the law relating to Enduring Powers of Attorney (EPAs) changed, limiting the power that an Attorney can wield over the subject’s affairs. It is something that few people wish to think about, but it makes sense to have in place a legal document that gives someone else the power to look after your affairs should you become frail or mentally incapacitated through age, illness or accident. Until now, that document has been an Enduring Power of Attorney, but after October this year it is not possible to make a new EPA, although existing ones will remain enforceable. Instead, the Department for Constitutional Affairs will administer what will be known as a Lasting Power of Attorney. The plus side is that the new document will limit the power of your chosen Attorney and there have in the past been well publicised cases of abuse of power and it will allow you to appoint more than one Attorney, for example someone to look after your health and someone else to look after your finances. The new Lasting Power of Attorney consists of two documents, each

around 25 pages in length. One document relates to property and affairs, whilst the other deals with personal welfare. If you have already drawn up an EPA you don’t need to take any action unless there is anything in that document you want to change. Your existing EPA will be valid indefinitely. If, however, you have never made an EPA you may want to think about doing so before the law changes. Either way, it’s important to think about what could happen during the course of your life, even if you are relatively young and healthy.

Need more information?

Please email or contact us with your enquiry. If you would like us to email a copy of our electronic legal magazine to someone you know, please email us with their details and we’ll send them a copy.

eSmartlegal - October/November/December 2007

9


Securing a successful business sale

Securing a successful business sale How to achieve the best available price Planning is the key to securing a successful business sale. When a business is sold, any well advised potential buyer will wish to undertake a full due diligence process in order to obtain as much detail as possible regarding the business they are seeking to acquire. In view of this, it is common practice to undertake a 3 to 5 year grooming period in order to present a business favourably, thereby achieving a maximum return on what has often been decades of time and investment.

Need more information? Please email or contact us with your enquiry. If you would like us to email a copy of our electronic legal magazine to someone you know, please email us with their details and we’ll send them a copy.

10

eSmartlegal - October/November/December 2007


Securing a successful business sale

If any business is either the subject of or considering litigation, the uncertainties involved are likely to affect the view of any potential purchaser. So, how do you groom a business for sale and achieve the best available price? The key is to identify the important areas within a business that need to be reviewed. Sound commercial legal advice can enable a vendor to present a business to potential purchasers in the best possible light, and thereafter achieve the maximum purchase price for their business. A buyer will want to ensure that the businesses customers are of a sufficient calibre. One sign of a good customer is that they pay invoices rendered to them on time. Invariably most businesses have customers that pay late, and as such a business should have efficient credit control procedures in place. A buyer will also want to ensure that a business is stable in order to minimize the risk of their investment. A vendor should therefore ensure that informal deals with suppliers and customers are turned into formal written contracts on favourable terms, and any dependence on a few large customers or a single source of supply should be minimised. If any business is either the subject of or considering litigation, the uncertainties involved are likely to affect the view of any potential purchaser. Therefore, any contentious matters should be considered and advised upon as part of the grooming process. A business position when contracting is strengthened if it has a set of standard trading Terms and Conditions which are bespoke to its sales activities and which it validly incorporates into any contractual relationship it enters into. Conducting business in this way will in turn strengthen a business position should any litigation proceedings be brought against it or should

it have to commence any such proceedings. Hence, businesses which trade using such Terms and Conditions will potentially be more appealing to potential buyers. If a business premises are leased, potential buyers will be looking for the lease to be easily transferable to and for the lease to not contain any restrictions or obligations. Commercial leases are often lengthy and complex legal contracts, and in view of this it is of paramount importance that they are carefully reviewed. It is imperative that the Statutory Books of a Private Limited Company are in good order. This means that any decisions of the Company should be correctly decided upon and recorded in minutes and resolutions, and requisite documentation should be filed with Companies House. If a business leases its equipment under a hire-purchase or similar arrangement, as with premises potential buyers will be looking for these to be easily transferable. A business that has any branding associated with it or deals in products that it has created, may have potential Intellectual Property Rights attached to these business assets. Some Intellectual Property Rights will arise automatically provided certain legal requirements are met, such as Copyright which can subsist in the design of any branding associated with a business. However, other Intellectual Property Rights require a process of registration to be undertaken for example, with respect to branding this could be protected through registering a product name or logo as a Registered Trade Mark and with respect to innovative products Patent protection can be applied for. Potential buyers will be looking for businesses that have properly protected their Intellectual Property

eSmartlegal - October/November/December 2007

Rights. This will require a business to not only consider how best to protect these Rights, but also to take action against any competitors who have breached these Rights so that the business has not wavered any protection afforded to it and thus not prejudiced its future position. If a business is transferred as a going concern then the business employees will transfer by virtue of the Transfer of Undertakings Protection of Employment Regulations 2006. A buyer will wish to be taking on reliable, competent and efficient staff. In addition, it will wish those personnel to be locked in and committed to the business it is seeking to acquire. Vendors should make it a key requirement that they have appropriate staff at all levels, particularly at management level. If a vendor is actively involved in the day-to-day running of a business, a purchaser may be keen to retain their services for a hand-over period after the sale. Many vendors will not want to stay on once they have sold the business. In this situation, the vendor should ensure that it has staff at a senior level that can run the business and have developed a sound management team. Businesses with such a management team will be more appealing to buyers because if the owner is not critical to the business then the buyer’s investment risk is clearly much reduced. Once appropriate staff have been found, steps should be taken to secure their retention. Appropriate and reasonably drafted employment contracts can assist in this regard. One way of protecting a business is to provide for restrictive covenants which protect the business should an employee seek to leave their employment and compete with the business activities. If a business has employment contracts in place, then it is advisable to have these reviewed to check that they are compliant with current legislative requirements. The business employment policies and procedures should also be checked to ensure that no potential claims will arise in respect of breaches of employment legislation which could, in turn, reduce the attractiveness of the business to purchasers.

11


Pre marriage agreements

Pre marriage agreements Protecting against a relationship breakdown

A pre marriage (or pre nuptial) agreement is a contractual agreement between two people who intend to marry which sets out in clear terms what they would wish to happen in respect of their financial affairs should the relationship break down.

12

eSmartlegal - October/November/December 2007


Pre marriage agreements

You would typically consider such an agreement if you were getting married and the assets you owned, you wanted to protect them as best you could. A pre marriage agreement could be considered particularly where: n one or both of you have significant personal assets n you are getting married in later life n you are getting married for a second or subsequent time n you have divorced and have received a settlement to provide a home for yourself and the children of that marriage n you have children and want to protect their inheritance Currently the law provides that the court has an absolute discretion to make orders in respect of settlement of financial matters when parties divorce. The court is therefore not bound to uphold a pre marriage agreement. However, increasingly the courts are prepared to recognise parties’ rights to try and determine their own affairs in order to provide certainty of outcome in any subsequent divorce proceedings. A pre marital agreement is good evidence to the court as to the intentions of a couple. Even if the court does not uphold an agreement in its entirety, it can still significantly influence the court’s decision.

The court is more likely to uphold a pre marriage agreement if certain conditions are met. In order to ensure that a pre marriage agreement is as effective as possible, the following should be considered:n the agreement should record that both parties have freely negotiated the terms and each has had the benefit of independent legal advice before entering into the agreement n there should not be any duress. A pre marriage agreement should be negotiated and executed in plenty of time before the planned wedding. If an agreement is entered into hastily and shortly before the marriage, then the court are more likely to take the view that one party has put pressure on the other to enter into the agreement n both parties should disclose full details of their financial circumstances to the other so that both enter the agreement with full knowledge of their respective positions n if children are born or if the marriage lasts for a reasonable length of time, then on marriage breakdown, the court will need to consider the needs of a spouse and children and a fair outcome. It is less likely that the terms of a pre marriage agreement entered into many years before will be appropriate

eSmartlegal - October/November/December 2007

n consider what provision should be made for a spouse and children and include this within the agreement. Those agreements which try and anticipate a fair outcome on divorce stand a better chance of being upheld. A pre nuptial agreement might provide for staged provision and the financially weaker party may acquire a higher settlement the longer the marriage lasts n regularly update and review the agreement, as time progresses and before any future transactions or acquisitions are undertaken which were not anticipated in the original agreement. It is possible to negotiate a mid marriage contract, particularly if circumstances change n if one or both of you are a national of another country you may be able to divorce in a jurisdiction which does uphold pre marriage agreements and any agreement could state in which country any future divorce proceedings should take place in

From December 2005 it has been possible for same sex couples to enter into a civil partnership. A civil partnership has many features similar to marriage and importantly gives the court power to determine how settlement of financial matters should be dealt with on an application for dissolution of the relationship. Civil partners may be older and more financially secure than married couples and may not have children. An agreement in such circumstances is therefore more likely to be upheld by a court. Parliament continues to ensure that there is a difference in treatment between parties who are married or who enter into a civil partnership and those who cohabit. Marriage or a civil partnership brings with it rights and obligations which cannot be abrogated by private agreement. A pre marriage or pre partnership agreement cannot provide absolute certainty but it is better to have a sensibly drafted agreement than no agreement at all if there are assets to protect.

Need more information? Please email or contact us with your enquiry. If you would like us to email a copy of our electronic legal magazine to someone you know, please email us with their details and we’ll send them a copy.

13


News in Brief

European Convention on Human Rights

Potential fines for house sellers

Ban on hunting with dogs

Town Halls have been ordered to fine house sellers if they fail to use Home Information Packs allowing local councils to rake in fortunes from sellers who flaunt the rules. The fines have been approved by housing Minister Yvette Cooper, enabling trading standards officers to impose the cash penalties on anyone who markets their three or four bedroom property without a HIP.

Violation of fundamental human rights The ban on hunting with dogs violates the fundamental human rights of thousands of people whose livelihood and way of life revolve around the meet and the chase, the House of Lords heard recently. Richard Gordon, QC, began the latest legal challenge to the 2004 Hunting Act by saying: “There are many for whom hunting is a core part of their lives and the rural communities in which they live.”

The Council of Mortgage Lenders said: “This move places extra burden on home owners. We are hoping that councils will be consistent. It will not be fair if sellers in one area are treated differently from those in another.”

He added: “The social network of many individuals is made up entirely of those who hunt. The ban jeopardises their social life, working life and family life.”

“disproportionate” interference with the rights of individuals under the European Convention on Human Rights (ECHR).

Between 6,000 and 8,000 were expected eventually to lose their jobs, he said, and many would also lose the homes that went with the jobs. Others could lose businesses and the commercial “goodwill” attached to them.

Compensation Scheme limit increased

Mr Gordon contended that the ban, introduced to prevent unnecessary suffering to animals, was a

These included the right under Article 8 to a private and family life including, he argued, a way of life of one’s own choosing and the right to peaceful assembly and freedom of association under Article 11. Two years ago, the House of Lords rejected an appeal in which the pro-hunt lobby claimed that the Parliament Act, used to force through the Hunting Act, was unconstitutional.

The Financial Services Authority (FSA) has increased the limit of the Financial Services Compensation Scheme (FSCS) cover for deposits to 100 per cent of the first £35,000 of each depositor’s claim. This increase applied from 1 October 2007. The previous compensation limit was a maximum of £31,700 (made up of 100 per cent of the first £2,000 and 90 per cent of the next £33,000).

Now campaigners are asking Lord Bingham, Lord Hope, Lord Rodger, Lord Brown and Baroness Hale to overrule a Court of Appeal judgment that dismissed their second challenge to the Hunting Act, in which they invoked human rights laws and European trade laws. The Countryside Alliance, along with various individuals, say that the Act which prohibits fox hunting, deer hunting and hare coursing with dogs in England and Wales should be declared unlawful.

FSA regulated deposit takers will need to review customer terms and conditions to amend references to the financial limits. On top of this, the Chancellor, Alistair Darling says he is looking at ways of guaranteeing people’s savings held by a bank or building society up to £100,000.

14

eSmartlegal - October/November/December 2007


Hate Crimes

News in Brief

Home Information Packs

A crime to incite hatred on the basis of sexuality Maximum sentence of seven years

The Government is to make it a crime to incite hatred because of a person’s sexual orientation or perceived sexual orientation, Jack Straw announced recently. The offence will carry a maximum sentence of seven years. Mr Straw, the Justice Secretary, outlined the plans to MPs but the details of the measure are yet to be finalised. He will insert a clause to create the offence when the Criminal Justice and Immigration Bill reaches committee stage. Under the proposal it would be considered a crime to incite hatred against homosexual, lesbian, bisexual, transgendered and heterosexual people. Mr Straw said: “It is a measure of how far we have

come as a society in the past ten years that we are now appalled by hatred and invective directed at people on the basis of their sexuality. It is time for the law to recognise this.” Prosecutions will be brought only with the agreement of the Attorney General. The new crime will cover people using threatening words or written material, or recording visual images or sounds that incite hatred because of sexual orientation.

eSmartlegal - October/November/December 2007

Mr Straw also plans to give parents more information about convicted child sex offenders. His proposals would put a legal duty on multi agency public protection panels, including police and probation services, to consider disclosing information. In future the presumption would be that the information should be disclosed if the authorities considered an offender was a danger to the public.

Home Information Packs (HIPs) were introduced by the Government with effect from 1 August 2007. It was then not possible to put a home having four or more bedrooms on the market (either personally or through an estate agent) unless a HIP had been ordered. This was extended to homes having three or more bedrooms with effect from 10 September 2007. From 1 January 2008 the HIP will need to have been obtained (as opposed to merely ordered) before marketing. The HIP is a collection of documents which must be provided to potential buyers of a home. It presently includes an Index, Sale Statement, Energy Performance Certificate, Local Search, Drainage Search and copy title deed. The Government hopes that the early production of such documents will streamline the sale and purchase of homes resulting in less abortive transactions. The introduction of the Energy Performance Certificate is intended to improve the energy efficiency of the country’s housing stock. Once the HIP has been prepared, the Seller’s chosen estate agent can market the property.

15


Electronic Communications

Speeding up the provision of shareholder information Scope of electronic communications widened Companies have been permitted to communicate electronically with their shareholders since 22 December 2000 by virtue of The Companies Act (Electronic Communications) Order 2000. However, these provisions contained various limitations which impeded its practical effect. With the introduction of The Companies Act 2006 which has seen the scope of electronic communications widened, with the primary intention of delivering significant savings to companies in terms of administration, printing, and postage costs, as well as speeding up the provision of information to shareholders. The reduced use of paper will also have environmental benefits. The electronic communication provisions of The Companies Act 2006 took effect from 20 January 2007 and allow (but not require) companies to communicate with shareholders via email, website postings and any other ‘electronic form’ as long as the information or documentation being communicated is in a machine readable form, capable of being read with the naked eye and permits a copy to be retained. This should include communications by facsimile and text message.

16

The Companies Act 2006 now permits, notices of meetings (and proxy appointments), copies of annual reports and financial summaries and copies of directors’/auditors’ reports to be communicated electronically. This also includes a catch-all provision allowing any other information “authorised or required by law to be communicated” to be done electronically. In addition, it is now possible for a company to go a step further and amend their Articles of Association by specifying any additional voluntary information or documentation that may be communicated electronically. It is likely that shareholders may wish to communicate with the company by electronic means, typically email. They will be permitted to do so provided that the company has expressly agreed to this, either generally (in respect of all communications made from time

to time) or specifically (in respect of one particular matter in hand). If the company does not wish its shareholders to communicate with it by electronic means then it must ensure that it does not inadvertently give consent. It should consider amending its Articles to include provisions prohibiting the use of electronic communications and stating the rules that will apply if the company inadvertently permits electronic communications. Schedule 5 of The Companies Act 2006 allows companies to send or supply documents and information to its shareholders in electronic form, subject at all times to shareholder approval. If a company’s Articles already permit it to communicate electronically with its members the transitional provisions of the legislation state that the company

will be able to continue to do so under The Companies Act 2006. But for those companies now looking to communicate electronically (or who wish to take advantage of the wider scope of the provisions of The Companies Act 2006), companies may now do so provided that: n i t has authority to do so, such authority having been conferred on the company either by ordinary resolution of the shareholders as a body in general meeting or where provision is otherwise included in the company’s Articles; n a nd thereafter, the individual shareholder for whom the company wishes to communicate electronically separately consents. Before sending any material electronically companies must have the requisite authority to communicate by such means. Authority is granted by: n p assing an ordinary resolution of its members as a whole in a general meeting; or

eSmartlegal - October/November/December 2007


Electronic Communications

n

a mending its Articles to include such authority.

Whichever route is chosen is a matter for the directors to consider but of paramount significance is whether the company can expect to achieve the requisite majority to pass the required resolution. Seeking authority of the members in general meeting requires that the resolution is passed by simple majority whereas including such a provision in the company’s Articles by their amendment will require a 75 per cent majority in order to carry the motion. Assuming that the company has the required authority to communicate electronically, it must thereafter seek individual agreement to receive information by electronic means from each intended recipient. The Companies Act 2006 draws an important distinction between electronic communications posted on the company’s website and electronic communications made by other electronic means. A company can only share information or documents with shareholders via a website, where the shareholder has expressly agreed to do so or, if the shareholder fails to respond within 28 days of the company’s request. The company

may consider the latter as the individual’s deemed consent to receive material from the Company through website communications, and the company may thereafter rely on postings on its website in respect of those individuals. Companies can only communicate with its members by other electronic means, where the shareholder has expressly agreed to this and has provided an appropriate address. The Companies Act 2006 does not include a provision deeming a member to have agreed to communications by email in the same way as it does for the use of websites. Where an individual does not agree or fails to provide an email address the company will need to send the information or documentation in hard copy or post it on the company’s website (if that means of consent has been separately obtained by express or deemed agreement). Notwithstanding that a member may have given (or be deemed to have given) consent to receive material electronically, a member may still request a hard copy and the company must send such document or information in hard copy form, free of charge, within 21 days of receipt of the request from the shareholder. Failure to do so is an offence, punishable by a fine.

eSmartlegal - October/November/December 2007

Where an individual does not agree to website communications, the company cannot ask again for his or her agreement and look to rely on the ‘deemed consent’ provisions above within the next 12 month period. This is designed to deter companies from pestering its shareholders for consent within short periods of time. The 12 month prohibition relates only to the ‘deemed consent’ provisions from the member’s failure to respond within 28 days of a request for electronic communications. The company may still ask permission at any time so long as it does not seek to rely on the deemed consent provisions within 12 months of its previous requisition. In any case, companies should consider the impact on investor relations of making repeated attempts to communicate electronically where those shareholders have otherwise refused.

Assuming that the company has obtained the necessary consents, the company must notify the intended recipient (in hard copy form unless the recipient has consented to e.g. email communications): 1. of the presence of the information on the website; 2. details of the website address; 3. the place on the website where the document or information may be accessed; and 4. how to access the information - e.g. the software requirements necessary to download the information (the company should ensure the recipients have easy and free access.) The documents or information must be available on the website either for the applicable period specified by The Companies Act 2006 or if no such period is specified, for 28 days from the date of notification sent to the intended recipient.

Need more information? Please email or contact us with your enquiry. If you would like us to email a copy of our electronic legal magazine to someone you know, please email us with their details and we’ll send them a copy.

17


Consumer credit

Consumer credit Applying for an enforcement order On 6 April 2007 several provisions of the Consumer Credit Act 2006 came into force. Under the 1974 Act, if a creditor failed to comply with the statutory requirements of the Act, the credit agreement would be unenforceable, unless the creditor was able to obtain a court order permitting enforcement. In certain circumstances the creditor would be unable to seek such an order from the court. This provision applied even to minor errors. The 2006 Act removes this restriction and in relation to agreements entered into after 6 April 2007, a creditor will be able to apply for an enforcement order in all circumstances. Under the new provisions the court will be obliged to make an enforcement order unless it is dismissed. When considering whether to dismiss the application the court will look at the prejudice caused to the borrower and the degree of culpability for the error. When making the enforcement order the court has power to reduce or discharge any sum due under the agreement, to attach conditions to the making of the order or to amend any term of the agreement. From 6 April 2007 the definition of an individual under the Act is narrowed. As a result, a credit agreement entered into with a partnership of more than three partners will not be covered by the Act. Although this change

18

is not retrospective some of the provisions of the 2006 Act will only apply to partnerships which fall within the new definition. Subject to transitional provisions, the provisions relating to extortionate credit bargains are replaced by the concept of unfair relationships. Under the new provisions a court can make an order where it finds that the relationship between a creditor and debtor under a credit agreement is unfair. When establishing whether the relationship is unfair, the court can consider the terms of the agreement, the way in which the creditor has enforced or exercised any of its rights and any other action taken by either the creditor or someone acting on its behalf. The court has a very wide discretion. If the court finds that the relationship is unfair, the orders it can make are wide reaching and include requiring the

creditor to repay any sum paid by the debtor by virtue of the credit agreement, as well as reducing the sums due under the agreement ordering the creditor to refrain from certain activities. There is a transitional period of one year which commenced on 6 April 2007. During this period, the court will not hear any application under the unfair prejudice provisions, in relation to agreements made prior to 6 April 2007 during the transitional period. If an agreement made prior to 6 April 2007 is completed or settled within the transition period, the debtor will be unable to make an application after the transitional period has ended. In the meantime, the existing extortionate credit bargain provisions will remain in place in relation to agreements which complete within the transitional period. In April 2008 further provisions of the Consumer Credit Act 2006 will come into force including:

1. T he financial limit of ÂŁ25,000 will be removed and unless an agreement falls into an exemption, all credit agreements with individuals will be covered by the legislation. 2. Creditors will be required to give periodic notices to borrowers who are in arrears under regulated agreements. Failure to comply with these requirements will result in a creditor being unable to enforce its agreement until it has complied with them. 3. Lenders will need to provide customers under regulated agreements with a statement of account on a yearly basis. If the lender fails to do this it will be prevented from enforcing the agreement until it has complied with its obligations.

Need more information? Please email or contact us with your enquiry. If you would like us to email a copy of our electronic legal magazine to someone you know, please email us with their details and we’ll send them a copy.

eSmartlegal - October/November/December 2007


Inheritance tax

News in Brief

Shake up for the system that appoints judges

Inheritance tax

Couples can now combine their inheritance tax allowances New rules announced in the Pre-Budget Report allows couples to combine their inheritance tax allowances and will make it simpler for them to shelter up to £600,000 of assets from tax. The ‘nil-rate band’ for inheritance tax (IHT) was previously £300,000 per person. What the measures announced by the Chancellor will do is bring together the existing allowances of married couples, civil partners, and widows and their late spouses. The chancellor also said he will increase these allowances to £350,000 per person, or £700,000 for a couple, by April 2010. It was already possible for couples to combine their IHT allowances in this way. But they could do so only by using a Willand-trust arrangement. The first

partner to die needed to have a Will that would pass assets to the survivor up to the value of the nil-rate band, and then place the remaining assets in a trust. Now the trust will not be needed to make full use of both allowances.

Changes announced n IH T allowance (the nil-rate band before the tax is paid) of £300,000 is now transferable between spouses or between civil partners, giving couples a combined allowance of £600,000 n

t he IHT allowance rises to £350,000 per person in April 2010, giving couples a combined allowance of £700,000

eSmartlegal - October/November/December 2007

n  widows, widowers and bereaved civil partners can now claim the combined allowance n

i ncreased IHT allowance from April 2010 is not a tax cut, the £350,000 allowance was announced in this year’s Budget

Need more information? Please email or contact us with your enquiry. If you would like us to email a copy of our electronic legal magazine to someone you know, please email us with their details and we’ll send them a copy.

The Justice Secretary, Jack Straw is to shake up the new system for appointing judges because of “concern at every level of the judiciary” about delays and bureaucracy. He also indicated, at a meeting of the Commons Constitutional Committee, that he does not favour Americanstyle confirmation hearings, with prospective candidates being questioned in Parliament. The proposal, mooted in Gordon Brown’s governance proposals in June, has been strongly opposed by the Lord Chief Justice, Lord Phillips of Worth Matravers. Mr Straw, who is also the Lord Chancellor, has also set up a review to look at the relationship between the Ministry of Justice and the Courts Service. The concessions have come in a clear attempt to break the deadlock in relations between judges and the Government. One of the judiciary’s key concerns is the Judicial Appointments System, set up to provide a new, independent and transparent selection method. A promise has been made by Mr Straw to review procedures, also to cut down on red tape so that judges are appointed sooner and trials are carried out more quickly.

19


Ageism in employment

Ageism in employment Direct and indirect discrimination outlawed The Employment Equality (Age) Regulations 2006 (the Regulations) came into force on 1 October 2006. The Regulations prohibit discrimination on the grounds of an individual’s age in the UK for the first time. The Regulations outlaw direct and indirect discrimination on the grounds of age in employment, vocational training, the award of professional qualifications and trade union membership. They make specific provision for victimisation and harassment and contain a statutory retirement procedure which allows employers to retire employees once they reach age 65 (or their Normal Retirement Age) without facing liability for unfair dismissal. The Regulations apply to charities in exactly the same manner as other employers and there are no exceptions. As with other areas of discrimination law, the new rules will apply to anyone who is employed under a contract of service, apprenticeship or a contract to execute any work or labour personally. This is a wider definition than employee. There are also territorial restrictions, the rules apply to employment or contracts at an establishment in Great Britain which generally means they apply to employees who work wholly or partly in Great Britain. The Regulations do not apply to unpaid volunteer workers. This is of particular importance to charities.

20

There are two important exceptions to this: n If the unpaid volunteer worker forms part of a paid employment relationship. If they are harassed on the grounds of age during that time they can still bring a claim, even though they were carrying out unpaid volunteer work at the time of the harassment. n If the unpaid volunteer work forms part of a vocational training relationship. Before relying on the unpaid volunteer exception, charities should ensure that there is no way that the volunteer could be viewed as receiving pay for carrying out work, and therefore may be classed as a ‘worker’ or ‘employee’ in law. The Regulations outlaw the following forms of discrimination: n direct discrimination; n indirect discrimination; n victimisation; and harassment. Both direct and indirect discrimination can be defended on grounds of justification. There are a number of other exceptions and defences. For the direct discrimination to be unlawful it must relate to one of the following: n t he arrangements an employer makes for the purpose of determining to whom he should offer employment (advertising); n r efusing to offer or deliberately not offer a person employment;

n t he terms on which employment is offered (recruitment); n t he terms afforded by an employer to a person in employment (benefits); n p romotion, transfer or training opportunities or receiving any other benefit; n d ismissal or subjecting an individual to any other detriment. Discrimination on grounds of a person’s age also includes discrimination on grounds of a person’s apparent age. Unlike other areas of discrimination law, direct discrimination on grounds of age can be justified. Indirect discrimination will occur where, for example, a charity applies to an employee a provision, criterion or practice which he applies or would apply equally to all employees, but: n t hat provision, criterion or practice puts or would put persons of the same age group as that employee at a particular disadvantage when compared to other persons; n t he employee is actually put at a disadvantage; and the charity cannot objectively justify it. n T he concept of the employee’s “age group” will therefore be critical to any age discrimination claim. How narrow or wide the age range should be is likely to be one of the issues in dispute in any claim.

eSmartlegal - October/November/December 2007


Pre-Budget Report

Pre-Budget Report Main points at a glance n  Consistently rising house prices over previous years have exposed many ordinary homeowners to a potential inheritance tax (IHT) bill as a growing number of estates exceed the current IHT threshold of £300,000 (2007/08). n G rowth forecast for the UK economy in 2008 cut from 2.5 to 3 per cent to 2 to 2.25 per cent. n

apital gains tax: taper relief C abolished to create single rate of 18 per cent from 6 April 2008. This change is designed to close a tax loophole that benefits private equity but its effect will be wider.

n I nheritance tax: thresholds increased to £600,000 immediately and to £700,000 from 2010 for all married couples and civil partnerships. Backdated for widows and widowers. n

eSmartlegal - October/November/December 2007

on-domiciles: plans to levy N a £30,000 flat rate charge for non-domiciled residents after they have lived in Britain for seven years.

n

 Changes to the state second pension, brought forward to 2009, raising £440m.

n A ir passenger duty paid by customers on business classonly airlines doubled to £80 from November 2008, closing a loophole whereby they paid the economy class rate. The duty to be fundamentally reformed from November 2009 to a tax on aircraft rather than passengers, reflecting journey length and emissions. Total changes will raise £520m by 2010. n

u blic borrowing in 2008-09 raised by £7bn to £36bn.

n

ealth spending rises by 4 per H cent in real terms in 2008-09 and 2010 - 11.

n

ew single budget to cover N the police, security services and other anti-terrorism operations. This will rise to £3.5bn in three years’ time

n

E xtra £2bn in public spending starting from 2010-11.

21


Pre-Budget Report

Pre-Budget Report Taxing times – your questions answered Q: After hearing the announcements in the Pre-Budget Report relating to inheritance tax, I always thought I could leave everything to my spouse without paying this tax? A: The Chancellor has not changed the so-called “spousal exemption” which means that assets passed between spouses, or civil partners are free of IHT regardless of their worth. The change relates to the amount of money a couple can leave to their heirs, in most cases their children. Q: Prior to the Pre-Budget Report I thought that both my wife and I had a £300,000 allowance, and were able to leave up to £600,000 between us without incurring inheritance tax? A: This is correct but the reality was that many people never took advantage of this, particularly in regards to the inheritance of the family home, as this involved changing the ownership of the home, drafting new Wills and setting up a trust. The changes announced in the Pre-Budget Report mean that far more couples will utilise their joint inheritance tax exemption, and it will be far simpler for families to ensure that more of their assets go to their heirs, rather than end up in the hands of the taxman. Q: Who can take advantage of this new ‘couple’s allowance’? A: It is estimated that this change will benefit 12m married couples and those in civil partnerships plus a further 3m widows and widowers. For the first time they will be able to transfer their individual allowance, so when the first spouse dies, their share of the home and any

22

other assets can be simply be transferred to the surviving spouse. But on the death of the second spouse inheritance tax will only be paid if assets exceed £600,000. Previously in the above example only the second spouse’s personal allowance of £300,000 would have been used.

of things to look out for: if your wife or husband did leave significant gifts elsewhere for example to children, grandchildren or into a trust, these will be deducted from their £300,000 allowance. But any unused allowance will be bolted on to your own exemption when distributing your estate to heirs.

Q: So how much less tax will people have to pay? A: Assuming you have avoided paying IHT on the full £300,000 (in other words your estate is worth at least £600,000), this means that your children will have avoided a tax bill of £120,000.

Q: I already have a trust in place in order to make the most of both my and my husband’s IHT allowances, how is this affected? A: The chances are this is a nil-rate band discretionary trust. These are fairly straightforward to set up, and are usually included in your Wills. If both you and your spouse are still alive the trust hasn’t been created yet, there will be a codicil in your Will that will set up the trust on the death of the first spouse. Following the Pre-Budget Report changes announced it would be a good time to review your Will and estate planning.

Q: I have lived with my partner for 39 years, but have not married. Will we be able to benefit? A: No. This change is for married couples and civil partners only. Single people and those who co-habit will not benefit. However, as you both have an individual allowance of £300,000 you will collectively be able to pass on £600,000 tax-free to children or other heirs. The crucial difference is that you cannot leave assets of more than £300,000 to each other without being subject to inheritance tax. And of course, if assets are transferred between you on the death of the first partner this will “mop-up” any inheritance tax allowance. Q: My spouse died before these changes were announced, will I be able to benefit? A: The Government has back-dated tax legislation and for once this will be beneficial for taxpayers. Anyone whose spouse has already died, regardless of how long ago this was, should be able to utilise the full “couple’s allowance”. There will be a couple

Q: Are there any cases where I should keep the trust? A: Trusts still have a key role to play in many people’s estate planning, and the inheritance tax changes do not alter this. These trusts can be particularly useful if you want to ensure that money is passed directly to children or grandchildren, if they are from a previous marriage. If you are passing assets to minors you will need a trust structure to ensure they are managed in their interest until they come of age. In some cases people also like to ensure that a large financial estate is managed on behalf of a surviving spouse.

eSmartlegal - October/November/December 2007


Private Equity

Private equity loophole closed Stealth tax introduced on small businesses The Government has been accused of introducing a stealth tax on small businesses by closing a concession aimed at entrepreneurs that was exploited by a small group of billionaire private equity bosses. The Chancellor said that he would abolish so-called taper relief on capital gains tax - which allowed private equity firms to pay as little as 10 per cent tax on the bulk of their profits. But rather than make the rule specific to private equity, as many had been expecting, the Chancellor’s new 18 per cent tax rate will be applicable across the board. The move will benefit landlords, second home owners and private investors who could pay substantially less tax on their capital gains. Currently, higher rate taxpayers who sell a property that is not their main residence, or shares in companies listed on the main stock market and make a profit of more than £9,200 could pay as much as 40 per cent tax on their profits if they sell within three years. After ten years, the effective rate of tax falls to 24 per cent. They will now pay the new 18 per cent capital gains tax (CGT) flat rate. This is the largest change to capital gains tax since Gordon Brown

instituted taper relief a decade ago and fundamentally returns the tax system to where it started. Small businesses will be the losers under the new regime. Taper relief was introduced by Mr Brown in one of his first acts as Chancellor as a way of encouraging enterprise. It emerged earlier this year that private equity firms which buy companies using huge amounts of debt were exploiting those rules to pay minuscule tax on the “carried interest”, or profits, that they made on their investments.

Need more information? Please email or contact us with your enquiry. If you would like us to email a copy of our electronic legal magazine to someone you know, please email us with their details and we’ll send them a copy.

eSmartlegal - October/November/December 2007

23


Pre-Budget Report

Pre-Budget Report Capital gains tax – your questions answered Q: What is the current rate of capital gains tax (CGT)? A: At the moment the actual rate of CGT you pay is determined by your top rate of income tax. So for higher rate taxpayers you will pay 40 per cent CGT in the 2007/8 tax year and lower rate taxpayers will only pay CGT at 20 per cent. But you can also pay as little as 5 per cent depending on the assets you are disposing of. Q: How does taper relief reduce my CGT bill? A: Taper relief can help to reduce your CGT bill. If your chargeable gains after allowable losses are more than the annual exempt amount for the year you can qualify for taper relief, which is calculated depending on how long the asset has been held. The longer the asset has been held the more relief you will get, after 10 years only 60 per cent of the gains are chargeable to CGT. This tapering can reduce the effective rate of CGT to 12 per cent for basic rate taxpayers and 24 per cent to higher rate taxpayers after a decade. Q: Is taper relief being scrapped? A: Yes the current system ceases from April 5, 2008. The Chancellor, Alistair Darling, has decided to move to a single rate of CGT for everyone which will be paid 18 per cent. Q: Are changes being made to the CGT exemption limit? A: No they are remaining the same. Everyone will still get a CGT

24

allowance, which is £9,200 for the current tax-year and any gains up to the limit are tax-free. The limit is likely to be increased next year. Q: I own a second home could this mean I will pay less tax when I sell-up? A: You are likely to benefit from the new system. At the moment the minimum CGT you will pay on the chargeable gain is 24 per cent, but it could be more depending on how long you have owned the property, if you have been a landlord for less than three years you face a CGT bill paid at 40 per cent. From next April you will only pay 18 per cent irrespective of how long you have owned your property. However, if you are a basic rate tax payer you may end up paying more. Q: I own a second property but it is a holiday let, how could I be affected when I come to sell it? A: If you own a qualifying furnished holiday let it is a business asset and so you will pay CGT at 18 per cent, rather than the current 10 per cent as a higher rate taxpayer. Q: Will I pay less tax when I sell my shares? A: Providing they are fully listed shares. You will pay CGT on the chargeable gain at 18 per cent, rather than a minimum of 24 per cent. But the new rules will disadvantage owners of qualifying “trading assets”, such as unincorporated business or

AIM listed shares in unlisted trading companies. The effective tax rate after two years of ownership which, after business asset taper relief, until now has been only 10 per cent, will now increase to 18 per cent. Q: I own an AIM share portfolio to shelter inheritance tax (IHT). How will the change affect me? A: Provided you have held shares which are eligible for business asset taper relief for a minimum of two years, the original investment, plus any subsequent growth will fall outside your estate for IHT. However, if you dispose of your shares after two years you will have to pay CGT at 18 per cent after April 2008, rather than the 10 per cent you would today as a higher rate taxpayer.

Q: How will venture capital trusts (VCTs) and enterprise investment schemes (EISs) be affected by the new system? A: If you took advantage of the old rules that allowed you to defer your capital gains by investing in a VCT pre-2004 you will benefit. Before you were looking a tax bill of 40 per cent, but now you will pay just 18 per cent. Those who rolled over capital gains with a 10 per cent tax charge into EIS shares will be disadvantaged. When they sell the EIS shares, the rolled over gain will be taxed at 18 per cent rather than at the 10 per cent they would have paid had they not done the roll over in the first place. Gains made on the EIS itself remain CGT free.

eSmartlegal - October/November/December 2007


Foreigners Tax

“Non-domiciled” foreigners to face an annual £30,000 charge Chancellor announces proposals to tighten up the rules Wealthy “non-domiciled” foreigners who have been in Britain for seven years face an annual £30,000 charge for staying outside the tax system. Otherwise they could have to pay income tax on their offshore assets of as much as 40 per cent. The Chancellor said that the new rules were aimed at “preventing people claiming that they are out of the country when they are actually here, from disguising income as capital and from claiming in effect two allowances.” The Chancellor’s proposals include modifications to the so-called “90day” residency rule for taxpayers. Non-domiciled taxpayers are being given an invidious choice between a £30,000 flat-rate charge, which they must pay year on year, or calculating worldwide income and gains. By amending some highly technical definitions, the Chancellor is also tightening what will be counted even if you pay the £30,000. As well as the tax, internationally mobile individuals are going to have an increased compliance burden. Under the proposals, put out to consultation, any non-domiciled foreigner who wants to claim

eSmartlegal - October/November/December 2007

their status will not be entitled to a personal tax allowance. The Treasury said that this would affect about 113,000 people. The charge would apply to individuals resident in Britain for seven years. The Chancellor also said that he wanted further to tighten non-dom rules for those resident here for more than ten years. Non-doms, he added, contributed £4 billion in taxes and any reform of the current system had to be “fair, workable and affordable.”

Need more information? Please email or contact us with your enquiry. If you would like us to email a copy of our electronic legal magazine to someone you know, please email us with their details and we’ll send them a copy.

25


Wild Animals Act

Dangerous Wild Animals Act Government relaxes the regulations on owning wild animals A total of 33 new species can now be owned without a licence after a review of the Dangerous Wild Animals Act deemed them not to be a risk to the public. They include a number of wild cats, North American and crested porcupines, hyraxes, sand snakes, mangrove snakes and the Brazilian wolf spider.

A total of 33 new species can now be owned without a licence after a review of the Dangerous Wild Animals Act deemed them not to be a risk to the public. They include a number of wild cats, North American and crested porcupines, hyraxes, sand snakes, mangrove snakes and the Brazilian wolf spider.

1976 Act because of concerns of non-compliance and because some of the animals on it were no more dangerous than a cat or dog. The Dangerous Wild Animals Act regulates the keeping of wild animals to ensure they are kept in circumstances which don’t pose a risk to the public, and protects the animals’ welfare, DEFRA said.

Woolly lemurs, tamarins, night (owl) monkeys, titi monkeys and squirrel monkeys also no longer require a licence under the Dangerous Wild Animals Act but are still covered by Cites, the international conservation legislation which regulates the trade in threatened species. And there are some new additions to the list of animals for which animal owners do need a licence, including the dingo. The Department for Environment, Food and Rural Affairs (DEFRA) drew up the new list after a review of the

Need more information? Please email or contact us with your enquiry. If you would like us to email a copy of our electronic legal magazine to someone you know, please email us with their details and we’ll send them a copy.

26

eSmartlegal - October/November/December 2007


Mortgage Fraud

News in Brief

Four out of five married couples with dependent children don’t have a Will The National Consumer Council (NCC) stated recently that close to four out of five married couples with dependent children don’t have a Will. For unmarried couples the figure is even higher, making them particularly vulnerable.

Organised crime syndicates target mortgage system Crime syndicates target residential and commercial property Organised crime syndicates have been targeting residential and commercial property in increasingly sophisticated mortgage frauds. There is concern that the predicted slow-down in house prices, exacerbated by the Northern Rock issue and the credit crunch, could expose multi-million-pound frauds involving hugely overvalued and, in thousands of cases, deteriorating properties that could leave the market highly unstable.

eSmartlegal - October/November/December 2007

There is growing concern that there has been a systematic attack on the mortgage system by linked frauds. The Financial Services Authority, which has been investigating poor lending practices in the sub-prime market, set up an early warning system on possible frauds with lenders. It has received about 200 tip-offs, 32 of which were strong enough to warrant further investigation.

A surviving partner can risk losing personal possessions, cash and property, as current inheritance laws do little to protect unmarried couples. NCC who carried out the survey of over 2,500 people describes the results as a ticking time bomb and is now calling on the Government for urgent action. Dying without a Will can leave all sorts of headaches for those left behind. Creating family feuds, and leaving relatives short of their inheritance.

Need more information? Please email or contact us with your enquiry. If you would like us to email a copy of our electronic legal magazine to someone you know, please email us with their details and we’ll send them a copy.

27


Inheritance

Wedding ceremony fails to stop a former wife from inheriting A woman whose husband died a few hours after their wedding ceremony has failed to stop his former wife inheriting a large chunk of his estate. Three Court of Appeal judges ruled that Owen Soulsbury’s promise of £100,000 to his former wife, Elizabeth, must be honoured by his widow, Kathleen.

Need more information? Please email or contact us with your enquiry. If you would like us to email a copy of our electronic legal magazine to someone you know, please email us with their details and we’ll send them a copy.

28

Elizabeth married Mr Soulsbury in 1966 and they had three children. After the marriage broke down in 1986, the husband was ordered to pay periodical payments to his former wife of £12,000 a year plus £2,400 a year maintenance for the younger children. In 1993, Elizabeth agreed to her former husband’s suggestion that he should cease paying maintenance in return for him leaving her £100,000 on his death. He married Kathleen on October 10, 2000 at Charing Cross Hospital in London, where he was being treated for leukaemia, and died that evening. The widow then refused to pay the legacy to the first wife, saying the agreement was unenforceable. She said her marriage had the effect of invalidating her husband’s Will which left the money to Elizabeth.

The appeal judges said Elizabeth could have taken her former husband, who received £565,000 in 1988, to court at any time to recover the unpaid maintenance but chose not to. Lord Justice Ward said: “Where the promisee has honoured her bargain, the deceased would remain bound to honour his. If he failed to provide payment for her on his death, her right to that payment became enforceable by a direct right of action for breach of contract against his estate.” He said the husband and his former wife had reached a “perfectly valid agreement” and dismissed the widow’s appeal.

eSmartlegal - October/November/December 2007


Mobile Industry

News in Brief

New supreme court Britain’s highest court, the new supreme court is being created under the Constitutional Reform Act 2005, and will;

Crackdown on the high fees for Britain’s mobile phone companies Britain’s mobile phone companies could face a crackdown on the high fees that they charge users for downloading data such as music tracks and e-mails when they are abroad after a European Commission inquiry. A study into the cost of sending text messages, downloading music and surfing the internet while away from home has been commissioned by Viviane Reding, the Commissioner for Information Society and Media.

Brussels has already forced the mobile companies to reduce charges for calling home from abroad by up to 70 per cent after classing the costs as extortionate. However, data has remained untouched.

The findings, which should be published in December, are the first steps in an inquiry that could lead to the mobile operators being forced to cut their prices. A final decision will not be taken until autumn next year.

Mobile operators are expected to fight vigorously against any cuts to the charges, which form a key part of their future sales plan. The operators are relying on uptake of the lucrative services to enable them to claw back the huge sums that they paid out during the auction for 3G licences at the height of the dot-com boom.

Internet access is now a standard feature on mobile phones. Users can access the net on 2.5G phones using GPRS technology or via “next-generation” 3G technology. Many consumers, however, are unaware of the much higher prices charged by phone companies for data abroad. They find out only when they return home to high bills. The mark-ups on data abroad are in addition to the marked-up prices on making and receiving calls.

Together, Britain’s main mobile operators paid £22.5 billion for the right to “next-generation” technology. Consumers, however, have remained stubbornly uninterested and calls and text messages still make up the bulk of the phone companies’ revenues.

n Hear appeals on arguable points of law of general public importance n Act as the final court of appeal in England, Wales and Northern Ireland n Hear appeals from civil cases in England, Wales, Northern Ireland and Scotland and criminal cases in England, Wales and Northern Ireland n Assume the devolution jurisdiction of the Judicial Committee of the Privy Council. The Commonwealth jurisdiction of the council will remain unchanged Source: Department for Constitutional Affairs

Need more information? Please email or contact us with your enquiry. If you would like us to email a copy of our electronic legal magazine to someone you know, please email us with their details and we’ll send them a copy.

The articles featured are for your general information and use only and are not intended to address your particular requirements. The articles are based on our understanding as at the 11 October 2007. They should not be relied upon in their entirety. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without appropriate professional advice after a thorough examination of their particular situation. Articles that make reference to the Pre-Budget Report are subject to the Finance Bill becoming law. Produced by Goldmine Publishing Limited • PO Box 5756 • Milton Keynes • Buckinghamshire • MK10 1AG

eSmart Legal Issue 5  

The digital UK legal magazine

Read more
Read more
Similar to
Popular now
Just for you