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Dear Guest, |
Hello again and welcome to the June edition of Business Lawyers Briefing whereby we provide SME owners with a short survival guide to business law do’s and don’ts.
First of all, tax; I know this is a thorny subject for you. When selling or buying a business HM Revenue and Customs (HMRC) have traditionally taken the view that where the nature of a business is such that it must trade from a property (for example, a pub, restaurant or a care home), where the use of specially adapted premises is concerned, the amount of goodwill in the business which is ‘extra’ is likely to be small. The argument in essence is that much of any ‘super profit’ earned by the organisation (on which a payment of goodwill could be justified) is likely to be due to its position or some other physical factor. This is relevant as the value of goodwill and is important because the apportionment of the proceeds of sale between different assets can potentially have implications for Income Tax, Corporation Tax, Capital Gains Tax, Value Added Tax and Stamp Duty Land Tax. For more please see here.
A subject very close to most SME’s mindset is often IR35 and the distinction between genuine employees and independent contractors. This is a complex subject with lots of complimentary tests but a well written contract of service will assist here as it will cover the areas that this helpful IR 35 guidance note provides. Elements of proving self-employment include control, delegation, own equipment, own insurances and acceptance of financial risk for instance and are commonly written by our lawyers into pertinent consultancy agreements.
Flexibility in business of course is key-especially in these challenging times which is why having a flexible workforce with some in-house-p/t, fixed-term or flexi time for instance-and others outsourced and “paid on demand” can pay real dividends in keeping one step ahead of the competition, creditors and in some cases the bailiff. Of course this does work both ways. From 6 April 2009, the statutory right to request flexible working arrangements is extended to employee-parents of children aged 16 and under as well as employees with caring responsibilities for children aged up to 6 (18 and under where the child is disabled) and carers of adults already have this right. Handling a request to work flexibly is important as readers of this e-newsletter will recall earlier case law whereby carers have been able to sue employers for indirect disability discrimination (which is another matter).There is a statutory procedure which must be followed when a request for flexible working arrangements is made which is outlined here.
More radical still is the Government’s Equality Bill pending that will include measures aimed at eradicating the pay gap that still exists in many workplaces between men and women. Incremental pay scales based on length of service can disadvantage women, who are more likely to have fewer years’ service either because of career breaks to look after children or because they are relatively new entrants into traditionally male-dominated professions. The Bill will address the “pay gap” between male and female employees that still persists despite the Equal Pay Act of 1970.
Whilst the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) operate to protect the employment law rights of employees when there is a relevant transfer of a business or part of a business, Regulation 8(7) provides that where insolvency proceedings are analogous to bankruptcy proceedings and have been instituted with a view to liquidation of the assets of the business, the transfer provisions of TUPE do not apply. In such circumstances, employees do not automatically transfer to the new owner and any dismissals are not automatically unfair. This has lead to concerns by employee groups over fast track “pre-pack” administration techniques and alleged abuses (though in truth there are some limited provisions to grant employees of an insolvent business certain preferential status so they do not fall into the mass of unsecured ordinary creditors who are unlikely to paid in full).
In a case concerning a ‘pre-pack’ administration (Oakland v Wellswood (Yorkshire) Ltd.), whereby a business went into administration with a prospective purchaser already in place, the Employment Appeal Tribunal (EAT) considered Mr Oakland’s appeal against the Employment Tribunal’s finding that he could not bring a claim of unfair dismissal because the transfer provisions of TUPE did not apply in his case and he did not have sufficient service with his new employer to bring a claim.
The dangers of unofficial and illegal software licence sharing recently arose when The Financial Times commenced a software infringement action, alleging in a US court that a large international asset management group had breached its licensing agreement, accessing thousands of articles improperly over several years and so causing it substantial loss of revenue by way of unauthorized user. Interestingly, the individual licence cost which is the subject matter of the claim is only $299 and the case goes to demonstrate how important it is not to infringe another’s IPR as the number of paid software licences can be easy to verify. If you are business with software to protect or a business that uses it and is worried about the dangers of infringement please get in touch for a confidential discussion.
In a similar vane with internet and copyright images and text it is commonly thought that because something is in the public domain (for example, it is on a ‘public’ web page) it is public property, but this is not the case and where appropriate circumstances exist, the owner of the copyright can take action to gain restitution for any losses suffered because of unauthorised use of copyrighted material. This is very common in our experience with photographs and images owned by Getty and other photographic libraries which use costly City law firms to pursue transgressors vigorously (for which you pay). Complaining it is the fault of the web designer is alas no defence and a good website agreement with sensible due diligence would allow you to pursue the website designer for an indemnity though more practical still are measures which prevent the issue arising in the first place.
Wishing you the best as ever.
Kind regards,
Brian McLelland
Business Lawyers
The business lawyers who mean business.
