Tax Memo: Business property relief
07 May 2008
HMRC have announced an extension to their advance clearance procedure, so that for a trial period it will include inheritance tax business property relief. Applications can be made for advance clearance from 1 May 2008, for a trial period of six months.
Clearances will be provided to business owners on the availability of inheritance tax business property relief where there is material uncertainty over the interpretation of the law. For inheritance tax legislation older than the last four Finance Acts, there is a further requirement that the uncertainty relates to a commercially significant issue. HMRC advise that they intend to respond to applications within 28 calendar days and that the application must identify what aspect of the law or HMRC's practice which is thought to be uncertain.

HMRC brief 25/08

Tax Memo: Inheritance tax forms
07 May 2008
HMRC have advised that the form IHT 200 has been updated to reflect the ability to transfer an unused nil rate band on the death of the second spouse.

HMRC IHT and Trusts Newsletter 22 April 2008

Memo points Readers should note that the claim for the unused nil rate band is made on form IHT 216. HMRC require supporting documents in respect of a claim which include copies of the following: the will, deeds of variation, death and marriage certificates of the previous spouse and the form IHT 200 for that estate. This evidence is required to show that the nil rate band was either not used on the first death, or the extent to which it was used and the percentage consequently available on the second death. For claims arising from deaths post 9 October 2007, it is advised that taxpayers compile a file to document any transfers made during lifetime as HMRC will require evidence of the extent of the nil rate band available on subsequent deaths in support of future claims.

Tax Memo: Errors
07 May 2008
In a recent ECJ decision it was held that member states can only rely on unjust enrichment when refusing to repay over-declared output tax if all traders in similar circumstances are treated the same. This does not mean that traders have to be in direct competition, and there must be an objective justification for different treatment. In the case in question unjust enrichment only applied to payment traders, and not to repayment traders (the law was amended in 2005 to remove this anomaly). It was further held that the fact the trader had passed on the VAT to their customers did not necessarily correlate to them not suffering any loss, as their sales may have decreased.

The ECJ stated that it was up to the national courts to decide whether repaying the VAT originally overpaid would remedy the infringement of equal treatment, even if this meant that the trader would be unjustly enriched. The court went on to state that, in principle, the repayment should be made to compensate the trader for the discrimination unless national law has another method of compensation.

The case has been returned to the UK courts for their final judgement. It is expected that HMRC will make some comment on the decision soon.

Employment Memo: Sex and sexual harassment - employer liability for third-party harassment
18 Apr 2008
Regulations have been made to amend the Sex Discrimination Act. Among other changes, the regulations introduce from 6 April 2008 a new concept employer liability for third-party harassment.

An employer will now be liable for harassment where he fails to take reasonable practical steps to protect employees from harassment by third parties, for example clients and customers, where such harassment is known to have occurred on at least two other occasions. Employers will not be liable for conduct beyond their control.

Sex Discrimination Act 1975 (Amendment) Regulations SI 2008/656

Employment Memo: Sex harassment – new definition
18 Apr 2008
Regulations have been made to amend the Sex Discrimination Act. Among other changes, the regulations introduce from 6 April 2008 a new concept of harassment related to sex. This is designed to cover two situations.

First, where a man or woman is subject to less favourable treatment which is not on ground of his or her sex, but related to his or her sex. The classic situation would be where a male manager enters a woman’s toilet to reprimand the female occupant. The woman has not been badly treated because of her sex; but her sex is relevant to the decision of whether this conduct has violated her dignity or created an intimidating, hostile, degrading, humiliating or offensive environment for her.

Second, the new phrasing also outlaws harassment related to the sex of a person other than the claimant. This change enables claims to be brought by someone who is not subject to the unwanted conduct himself or herself but who witnessed the unwanted conduct and whose dignity is nevertheless violated, or who finds that an intimidating, hostile, degrading, humiliating or offensive environment has been created for him or her.

Sex Discrimination Act 1975 (Amendment) Regulations SI 2008/656

Employment Memo: Sexual orientation harrassment homosexual jibes to heterosexual
18 Apr 2008
In this case, an employee, E, was subjected to sexual innuendo to the effect that he was gay, because he lived in Brighton and had attended boarding school. His work colleagues knew however that he was heterosexual.

At a preliminary hearing, a tribunal ruled that the employee was not protected by the regulations. The EAT agreed, there was no indication that the sexual innuendos were as a result of E’s work colleagues believing him to be homosexual. As E’s work colleagues know E was not homosexual, E was not covered for homosexual harassment on the grounds of E’s sexual orientation.

English v Thomas Sanderson Blinds Ltd [2008] EAT case 0556/07

Employment Memo: Disciplinary proceedings - status of spent warnings
18 Apr 2008
The decision of the EAT in the case of Airbus UK Ltd v Webb to follow Diosynth Ltd v Thomson and hold that it was unfair to take account of a spent warning has been reversed by the Court of Appeal.

An employer dismissed an aircraft fitter for watching television in a locker room when he ought to have been working. Four other workers in the same position were not dismissed. In contrast to his colleagues who had clean disciplinary records, the worker had been given a final warning for a similar act of misconduct some 13 months before. However, the final warning given with respect to the earlier misconduct had expired after 12 months. These facts raised the question of how to deal with the spent warning. There is no rule of law, the Court held, that a dismissal will never be fair where an employer has taken account of a spent warning. Whether an employer should take account of a spent warning will depend entirely on the facts of each case.

Airbus UK Ltd v Webb [2008] IRLR 309, CA

Employment Memo: ACAS concilation - extended time of involvement
18 Apr 2008
ACAS have announced that with regard to all cases live at 1 April 2008 and those received by ACAS on or after that date, in advance of the removal of fixed conciliation periods by the current Employment Bill, it will make use of its power to conciliate in all employment tribunal cases, including where a fixed conciliation period has expired.

Company Law Memo: Companies Act 2006 implementation
17 Apr 2008
Another significant tranche of the Companies Act 2006 was brought into force on 6 April 2008. Among the changes implemented was the option for private companies to choose whether or not to have a company secretary. The other key areas implemented deal with:
- dividends and distributions;
- accounts and reports;
- audit and auditors; and
- schemes of arrangement.

As with previous implementation phases, there are transitional arrangements in place specifying how the new provisions apply, where necessary.  Generally speaking, where something was started or completed before 6 April (e.g. a request was submitted, a contract signed or an appointment made), the old provisions continue to apply.  Where something is started on or after 6 April 2008, the new Act applies.  Most notably, the provisions relating to accounts and reports apply to a company's accounts or reports for financial years commencing on or after 6 April 2008.  This means that the Companies Act 1985 position will continue to apply to most accounts and reports for an initial period.  Any unusual transitional arrangements are explained in updates to the relevant paragraphs.

As well as the provisions of the Act itself, a raft of secondary legislation on these topics has also been brought into force. 

Specific paragraphs of Company Law Memo 2008 have been updated as necessary.  For an overview of this implementation phase, see CLM 2008 Newsletter, Issue 2.  A full implementation timetable can be found on the newsletters homepage. 

Company Law Memo: New draft regulations published
17 Apr 2008
BERR has published new drafts of various regulations under the new Companies Act. They relate to the final implementation phase, which is due to take place on 1 October 2009. 

One of the new drafts is the Companies (Model Articles) Regulations 2008, which sets out new versions of the proposed model articles for private companies limited by shares, private companies limited by guarantee and public companies.  Most of the changes are fairly minor, although there are some important differences such as the removal of the chairman’s casting vote at shareholder meetings.  A destination table comparing the July 2007 version with this latest version is on the newsletters homepage, so that readers can follow the references to the draft new model articles given in Company Law Memo 2008. 

The other topics covered by the new draft regulations are:
- company and business names;
- trading disclosures (a final version of the Companies (Trading Disclosures) Regulations 2008 (coming into force on 1 October 2008) has been published, along with a draft of some amendment regulations (coming into force on 1 October 2009));
- company registrations;
- shares;
- company records (there are separate draft regulations concerning inspection and fees);
- service addresses;
- the Registrar of Companies;
- the annual return;
- charges; and
- striking off. 

The paragraphs of Company Law Memo 2008 affected by these changes have been updated. 

VAT Memo: New option to tax legislation
29 Apr 2008
New legislation has been published that will replace Schedule 10 VATA 1994 with effect from 1 June 2008. HMRC have also issued their interpretation of the legislation, currently in draft form, which will be finalised before 1 June 2008.

SI 2008/1146
Information sheet 03/08

VAT Memo: Unjust enrichment
29 Apr 2008
In a recent ECJ decision it was held that member states can only rely on unjust enrichment when refusing to repay over-declared output tax if all traders in similar circumstances are treated the same. This does not mean that traders have to be in direct competition, and there must be an objective justification for different treatment. In the case in question unjust enrichment only applied to payment traders, and not to repayment traders (the law was amended in 2005 to remove this anomaly). It was further held that the fact the trader had passed on the VAT to their customers did not necessarily correlate to them not suffering any loss, as their sales may have decreased. The ECJ stated that it was up to the national courts to decide whether repaying the VAT originally overpaid would remedy the infringement of equal treatment, even if this meant that the trader would be unjustly enriched. The court went on to state that, in principle, the repayment should be made to compensate the trader for the discrimination unless national law has another method of compensation.
The case has been returned to the UK courts for their final judgement. It is expected that HMRC will make some comment on the decision soon.

Marks & Spencer plc v HMRC [2008] (C-309/06)

AFR Memo: ASB – issues a draft Abstract covering hedging net investments in foreign operations
17 Oct 2007
The ASB has issued a Draft Abstract “Hedges of a Net Investment in a Foreign Operation”, based on a draft interpretation issued by the International Financial Reporting Interpretations Committee (IFRIC).

When the Abstract is issued in its final form, it will be applicable to entities applying FRS 23 “The Effects of Changes in Foreign Exchange Rates” and FRS 26 “Financial Instruments: Recognition and Measurement”. Entities adopting SSAP 20 “Foreign currency translation” will not be affected.

The draft Abstract primarily addresses the issue, of whether a hedged risk represents the difference between functional currencies of the parent company and its foreign operation, or the difference between the presentation currency of the parents’ financial statements and the functional currency of the foreign operation?

Other issues addressed include whether: