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January 2010 Newsletter Pre-Budget Report Checklist for Businesses This checklist highlights some of the key issues from the Pre-Budget Report that are likely to have an impact on small businesses. Small companies’ rate of corporation tax The increase in the small companies' rate of corporation tax will be deferred for a further year. The rate will remain at 21% for 2010-11 and will increase to 22% for 2011-12. Employers' National Insurance Contributions Employers' National Insurance Contributions will rise from their current level of 12.8% to 13.8% from April 2011. A 0.5% increase was announced in the 2008 Pre-Budget Report and a further increase of 0.5% was introduced in the 2009 Pre-Budget Report. Research and development tax relief The Government has announced that one of the conditions that a small or medium-sized enterprise (SME) had to satisfy in order to claim the enhanced tax relief for research and development will be abolished. A SME company was previously obliged to prove that it owned any intellectual property derived from the research and development to which the expenditure was attributable. If your business is classed as a SME you may claim an enhanced tax relief at the rate of 175% for qualifying expenditure on research and development. The change will have effect for accounting periods ending on or after 9 December 2009. Electric cars and vans The Government announced that it will provide greater incentives for businesses to reduce emissions from their company car fleets by introducing a number of measures including:
• Exempting electric cars from company car tax (CCT) for five years from 2010.
• Extending CCT bandings in 2012.
• Exempting electric vans from the van benefit charge for five years and introduce (subject to confirming compatibility with state aid rules) a 100% first-year allowance for business expenditure on new electric vans. Business rates: empty property relief The Scottish Ministers set the uniform poundage rate to be levied throughout Scotland for each financial year (i.e. 1 April to 31 March). The poundage rate for Scotland in 2009-10 is 48.1 pence. Larger businesses in 2009-10 (rateable value in excess of £29,000) pay a poundage supplement of 0.4 pence. For 2010-11 the poundage will be 40.7p and the poundage supplement 0.7p. The Scottish Assessors are responsible for valuing the non-domestic property in Scotland to determine rateable values. Further information can be found at the Scottish Assessors portal: http://www.saa.gov.uk There are a number of rate reliefs in operation. See here for more information: http://www.scotland.gov.uk/Topics/Government/local-government/17999/11199/22228
Business Payment Support Service
The Business Payment Support Service (BPSS) helps viable businesses facing temporary financial difficulties to spread tax payments over an agreed timetable. It was announced in the 2009 Pre-Budget Report that the time to pay facility will continue for as long as it is needed. HMRC will require businesses seeking time to pay arrangements worth £1 million or more to provide an Independent Business Review in support of their request. It is expected that the new requirement will be implemented from April 2010.
More information If you have any questions about the content of this checklist or require further information on any of the issues raised in the Pre-Budget Report please contact Raymond in our Edinburgh Office Changes to business rates reliefs from 1 April 2010 Revaluation of business rates takes place every five years and the next revaluation will take effect from 1 April 2010. The Valuation Office Agency has provided details of various resources to help businesses with the revaluation process, including a dedicated website (http://www.voa.gov.uk). Small Business Rate Relief provides certain business rate payers with a reduction of up to 50% on their bills. It is available where the rateable value of your property falls below the threshold, currently set at £14,999 (or £21,499 for properties in Greater London). The threshold will increase from £17,999 (or £25,499 for properties in Greater London) on 1 April 2010. VAT rate increase reminder The standard rate of VAT reverted to 17.5% from 1 January 2010. Shops are allowed to add the extra VAT to prices at the tills for up to 28 days, giving them additional time to complete the re-pricing of stock.
Companies Act Changes Afoot The Companies Act 2006 is, at 761 pages, the longest Act of Parliament in British history and was only fully implemented in October. However, changes are already afoot! Apparently, the sections of the Act which require disclosure of share capital (the ‘statement of capital’ in the Act) have been recognised as being too difficult for some companies to comply with – so a consultation exercise has been launched by the Department for Business, Innovation and Skills (BIS) to consider how the Act may be revised. Contact Ross Hood in our Edinburgh Office for more information More details can be found on the BIS website at http://www.berr.gov.uk/consultations/page53695.html
Intellectual Property Theft Employee Who Took Employer’s Intellectual Property Faces Court Wrath
An employee who left a conference business and who ‘borrowed’ his former employer’s database, transferred one of its trading names to use for his own purposes and made use of some of the same conference speakers (asking them to speak ‘again’ at conferences he was organising, giving the impression that his business was the same business) found the court unimpressed recently. It allowed an injunction against the ex-employee and accepted claims for breach of confidence, infringement of database rights and passing off (which is where a business represents itself to be another to benefit from the other business’s good name) from his former employer. The ex-employee, whose website described the Anglia Polytechnic University graduate as a graduate of ‘Cambridge’, faces a substantial, but as yet unquantified, claim for costs and damages. Intellectual property developed whilst working for someone else belongs to the employer, unless there is an agreement to the contrary. If you are concerned about misuse of your data or intellectual property assets, contact Raymond McLennan in our Edinburgh Office for advice.
Insolvent? - Got a Landlord? The law in relation to landlord's hypothec underwent significant changes back in April 2008 when the Bankruptcy and Diligence (Scotland) Act 2007 abolished sequestration for rent and instead provided that the hypothec was to rank as a security in an insolvency procedure. Since April 2008 certain issues have arisen out of ambiguities in the legislation. These issues have become apparent particularly in administrations. The Landlord's hypothec is a security arising by operation of law . On a tenant becoming insolvent, the hypothec provides the landlord with security over goods on the premises that are owned by the tenant. The security is for unpaid rent only. Any claim for dilapidations or other costs will not be covered by the hypothec. Priority of the hypothec in relation to the floating charge Prior to April 2008 there was conflicting case law as to whether the landlord's hypothec ranked ahead of the floating charge. The general view taken by solicitors was that the landlord's hypothec ranked ahead of a floating charge. However, this priority was of no value if goods had been removed from the premises prior to the landlord raising sequestration for rent proceedings. Although there is yet no case law on the matter, it is our view that post 1st April 2008 the Landlord's hypothec ranks ahead of the floating charge in respect of goods on the premises at the date of administration. Arrears of rent due as at date of appointment of the administrator All rent which has fallen due at the date of the appointment of an administrator will be secured by the landlord's hypothec. Whether rent has fallen due is determined by the date on which the payment was due to be made in terms of the lease. Therefore, even if rent that has not been paid relates to a period of occupation after the date of administration, it will be due pre-appointment if the lease required it to be paid in advance and the date the payment was due was pre-appointment. It is therefore vitally important to know the date on which rent fell due. Rent falling due after the date of appointment Unfortunately, the legislation is unclear as to whether the hypothec is security for rent that falls due after an appointment. The point will not be clear until a ruling has been made by the courts. Ways to deal with the uncertainty as to the sum secured There would appear to be two ways to deal with the uncertainty surrounding the sum secured by the hypothec. The first would be to seek directions from the court. The likely outcome of such an action is unclear. The second option would be to seek to reach a commercial settlement with landlords where the issue arises. Conclusions The uncertainty in relation to landlord's hypothec clearly requires issues of risk management to be assessed by Insolvency Practitioners. In our view there if the sums involved are significant and agreement with the landlord cannot be reached the administrator should seek directions from the Court.
For advice on any insolvency issue, please contact Robin Valentine in our Edinburgh Office for more information
And finally... Snow joke. How cold is cold?
15 Degrees Londoners put on sweaters (if they can find one) 12 Degrees Birmingham residents turn on the heat 4 Degrees You can see your breath, Londoners shiver uncontrollably, Glaswegians go swimming 2 Degrees Italian cars don't start Zero Water freezes -2 Degrees You plan your Holiday to Australia -5 Degrees Scottish water freezes, Londoners weep pitiably, Aberdonians eat ice cream, Canadians go swimming -10 Degrees Politicians begin to talk about the homeless, Newcastle city water freezes. -15 Degrees French cars don't start, Cat insists on sleeping in your bed with you. You need the AA to get the car going - 20 Degrees Highlanders put on T-shirts. German cars don't start, Eyes freeze shut when you blink -25 Degrees You can cut your breath and use it to build an igloo, Dundonians stick tongue on metal objects, Londoners cease to exist -30 Degrees Cat insists on sleeping in pajamas with you, Politicians actually do something about the homeless, Highlanders shovel snow off roof, Japanese cars don't start -35 Degrees Too cold to think, You plan a two week hot bath, Swedish cars don't start -40 Degrees Londoners disappear, Aberdonians button top button, Highlanders put on sweaters. -50 Degrees Political hot air freezes, Aberdonians close the bathroom window -80 Degrees Hell freezes over, Polar bears move South -90 Degrees Lawyers put their hands in their own pockets (Ah, go on...it was worth waiting for..)
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