Taxation of settlement payments

There are a number of dates you might want to save for April 2018: the Commonwealth Games in Australia, the Rugby World Cup Sevens in San Francisco or the Grand National at Aintree. What you perhaps didn’t know is that in April 2018, draft legislation concerning changes to the taxation of termination payments is intended to come into force.

Though certainly not as exciting as a day at the Races, there are 3 key changes being made to the taxation of termination payments of which you should be aware.

The main changes will:

  • make all payments in lieu of notice (PILONs) taxable, even if they are non-contractual;
  • require payment of employer National Insurance contributions (NICs) on sums over £30,000 (NICs are not currently payable); and
  • ensure payments for injury to feelings are subject to tax (there is currently a conflict of jurisdiction on this matter).

Why are changes being made?

The Government claims it has several objectives for the tax and NICs rules which can be achieved by making these legislative changes. These objectives are to:

  • continue to support individuals when they lose their job;
  • clarify the scope of the exemption for termination payments;
  • align the rules for income tax and employer NICs so that employer NICs will be payable on payments above £30,000 (currently subject to income tax only);
  • remove foreign service relief; and
  • clarify that the exemption for injury does not apply in cases of injured feelings.

The Government believes that by making these changes the £30,000 income tax exemption can be retained and employees will continue to benefit from an unlimited employee NICs exemption – thereby continuing the support given to those who lose their jobs. The Government’s declared aim is to remove the uncertainty around different payment types, and so ensure that the £30,000 exemption can only be used for payments that are genuinely the result of an individual losing his or her job.

What are the likely consequences of these changes?

  • Employees are likely to demand larger termination packages to compensate for the extra tax payable. As the typical employee who will be affected by this change will be a higher rate tax payer, this points to a £12,000 hike in such an employee’s expectations;
  • Employers may attempt to attach a redundancy label to a dismissal when, in fact, dismissal is occurring for a different reason. This could lead to an increase in the number of Employment Tribunal claims;
  • More claims may progress to an Employment Tribunal hearing where an employee can potentially recoup the lost tax-related advantage by receiving a non-taxable Tribunal award. This would in turn limit the prospect of achieving an agreed settlement, thereby costing businesses more time and money.

The precise wording of the draft legislation is open for consultation until 5th October 2016.

David Ward

David Ward

David Ward
Employment team
0113 227 9262

Posted in Employment Law | Leave a comment

Penalty Shots

In 1915 a case known as Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited gave judicial guidance on the matter of penalty clauses, any clause in a contract where, when one party fails in its obligations, the other party receives compensation disproportionate to its loss, for example doubling its invoiced amount on late payment.

The rule in Dunlop was that the court would not enforce a penalty clause – you can only get back what you have actually lost. However, the legal tide has turned against that opinion in two recent cases.

ParkingEye Ltd v Beavis involves a familiar situation. Beavis left his car beyond the time limit in a car park, and claimed the fine for this was a penalty, as it did not represent any actual loss.

At a rather different level, Cavendish Square Holding BV v Talal El Makdessi involved a sale of company shares where the seller was bound not to compete, and where a breach of that covenant permitted the buyer, Cavendish, to withhold further payments worth around £44 million. Makdessi argued the clauses represented a penalty that should not be enforced.

In both cases the courts upheld the contracts, penalties and all. The argument in ParkingEye was that the clause represented a commercial necessity, in that ParkingEye needed to control use of the car park and the fine for over-staying was a reasonable method of doing so.

The Supreme Court provided more detailed reasoning for the cases, stating whether or not a penalty clause would be upheld would be based on “whether the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation”. As a rule of thumb a primary obligation is effectively bound up with the main point or function of the contract, whereas a secondary obligation is more incidental or contingent. It is worth noting that there was dissent amongst the Cavendish judges concerning what clause was primary and what was secondary.

However, the decision in these cases invites contracts allowing for substantial penalties if a party breaches its contractual responsibilities. The courts are likely to be cautious, but in cases where the conduct of a party is vital to the proper functioning of the contract, the door is open for judges to be persuaded to uphold the penalty.

One worry arising from these decisions is that contract terms are seldom negotiated with a true equality of arms. One party often has far more bargaining power, and the other party may have only a limited ability to go elsewhere. In such circumstances the imposition of a penalty clause may become a bullying tactic by the stronger party, and it remains to be seen whether courts will take this imbalance into account when deciding whether a penalty clause should be upheld.

Picture of Luke Patel

Luke Patel

Luke Patel
Commercial Dispute Resolution Team
0113 227 9316

Posted in Commercial Dispute Resolution | Leave a comment

Are you connected?

In a previous blog in February 2015 I spoke about the Government’s initiative for ‘super-connected’ cities and the pledge to achieve a ‘transformation in broadband access’. Recent developments have shown that the Government continue to place access to broadband high on their agenda, but how does that benefit park businesses, especially those in rural areas for whom access to broadband can be a challenge?

Internet and parks

Whether you operate a residential park or a holiday park, access to fast and reliable internet is likely to be an important part of your business for two reasons:

  1. To enable you to manage your business. A presence on the web (be that via a website or social media) is considered a fundamental part of any business. This is no different for park businesses, especially holiday parks which will often use their webpage to provide online booking facilities, (to include accepting payments online), and to advertise holiday homes for sale. In addition access to the internet enables email communication with customers and suppliers alike.
  1. To offer internet access to customers. Being connected is considered essential for the majority of park customers (particularly those attending holiday parks), most of whom have more than one digital device on which they may want to access the internet (phone, IPad, laptop etc). If a customer on park is not able to read their emails/watch their favourite programme on catch up/send out tweets/play the latest trending game [delete as appropriate!] due to slow access speeds it can often lead to complaints for the park. There is even a website where customers can check whether or not a park offers wi-fi internet access!

Charging for access to the internet is also a common issue and one which is different for each park. It may be that on a holiday park, a system is operated where customers can purchase access to the internet on a daily basis, or access may be free in communal areas. On a residential park it may be that the cost of connecting homes to super fast broadband are recovered from the residents in a pitch fee (if the necessary consultation took place).

What does the law say about the internet?

In May 2016 the Digital Economy Bill was introduced during the Queens Speech. The purpose of the Bill is said to be “to enable access to fast digital communication services for citizens and business…”, words which are likely to be welcomed by those parks located in rural areas who find access to broadband and download speeds problematic, which can in turn impact on customer enjoyment and business efficiency.

The Bill contains a number of measures which seek to achieve a ‘broadband universal service’ for the United Kingdom. In other words, the Bill seeks to create a legal right for people and businesses to request access to an affordable broadband connection with set minimum download speeds. It is intended that the minimum download speed will be set out in supporting regulations at an introductory rate of 10 megabytes per second, with the intention that this figure will increase over time as internet speeds improve.

The Government proposes that by the end of 2017 at least 95% of premises in the UK will have access to broadband at speeds of at least 24 megabytes per second. But what about the missing 5% which will inevitably include rural areas in which parks are located?

What can you do if your park’s access to broadband is poor?

You could take matters into your own hands as the residents of Yorkshire village Clapham-cum-Newby did this year when a team of volunteers laid ducts across the countryside to connect the community to high speed fibre broadband.  Such community driven schemes are common now and financial support may be available for parks via the BT Community Fibre Partnership Scheme (or other similar schemes) enabling those communities in the 5% to seek access to grant funding to put towards the costs of broadband infrastructure.

If the broadband service at your park is running at less than 2 megabytes per second you may be able to access the Government satellite internet scheme which aims to connect businesses with a poor connection to high speed internet via satellite.

The Digital Economy Bill is an important step forward in securing a legal right to access to the internet at a certain minimum speed and parks should continue to ‘watch this space’ in an ever increasing digital age.

Aimee Hutchinson

Aimee Hutchinson

Aimee Hutchinson
Associate Solicitor
Holiday and Home Parks Team
0113 2279 203

Posted in Holiday and Home Parks | Leave a comment

Just not cricket

In an age when sports broadcasting deals involve millions if not billions of pounds, it is not surprising that broadcasters and governing bodies will take all the steps they can to stop anything that they see as infringing their intellectual property rights.

Sky and the ECB (the governing body for cricket in England and Wales) are the latest to do just that and have successfully argued that a company which provided a platform for users to upload eight second clips of, amongst other things, broadcasts of cricket was infringing the copyright in those broadcasts.

For lawyers, the case was interesting for a number of reasons.  Two stand out.  Firstly, it provided further clarity on what can be considered a ‘substantial part’ of a broadcast and, secondly, it gave guidance on the defence of fair dealing for the purposes of reporting current events.

Substantial part

In order for a copyright owner to successfully argue that its copyright has been infringed it has to be able to show that a “substantial part” of the original work has been copied.  The test as to whether this is the case is not a quantitative one but a qualitative one (i.e. it isn’t the amount which is copied but the importance of what is copied that matters).  In this case, because the uploaded clips were of the important bits of the matches and they exploited Sky’s investment in producing the broadcast, they were considered to be a substantial part even though they were tiny in relation to the session of play in which they took place (a session lasts for two hours).

Fair dealing for reporting news events

“Fair dealing” is a vague term but in a nutshell it is used to set a limit on certain defences that exist in copyright law.  The idea is that you can, for example, reproduce copyright work for reporting current events (the defence relied on in this case) but only if that use can be considered fair dealing.

The judge dissected the wording of this piece of law in fine detail.  He decided that reporting news events did not just mean the traditional type of reporting – it could include “citizen journalism” (i.e. reporting of events by a member of the public even if on a website or social media platform).  However,  although the clips in question fell within this definition, the use of them was not “fair” because it effectively operated in competition with the Sky broadcasts – the value of Sky’s rights was therefore reduced – and the defendant was making money from its service through advertising revenue.

Sky and the ECB therefore got the result they wanted and it’s likely this case will be used to bring more claims against similar platforms in future.

Phil Gorski

Phil Gorski

Phil Gorski
Commercial Dispute Resolution
0113 227 9318

Posted in Intellectual Property | Leave a comment

Setting the Olympic bar

What better way to grab people’s attention than to take a ride on the back of the Olympic train? Remember the excitement surrounding the London Olympics. I attended some of the events myself and the buzz around London was staggering. Shops were full of merchandise and people flocked to get their hands on the memorabilia. But is all merchandise legitimate? Can businesses cash in on the hype unrestricted? What about home-made banners, posters and decorated cupcakes? What about an athlete’s sponsor mentioning the competition? The answers to all of these questions lie within the scope of intellectual property law.

This is the area of law in which I have been specialising for 15 years. It is a complex area and can catch many people unawares. Knowledge of some of the basic principles and access to experts is well advised.

As we get carried away by the Rio carnival, let’s take a look at the dos and don’ts of the Olympic logos. I am sure everyone is aware of the Olympic rings these, along with the flame and words such as “Olympic”, “Olympiad”, and “Paralympic”, are registered trademarks owned by the International Olympic Committee (IOC), the global organizing body of the Olympics. The marks are protected worldwide and are upheld by national committees. In fact, any nation hosting the Olympic Games must themselves agree to and pass statutes designed to protect the trade marks. This year it is the turn of The United States Olympic Committee (USOC).

The consequence is that the Olympic marks cannot be used without the IOC or the USOC’s prior written consent. Even if permission to use is granted there are stringent rules governing the visual representation of the marks, so that only authorised versions can be portrayed legitimately. Already we are seeing warning letters being sent by the USOC to certain sponsors of Olympic athletes for featuring “#Rio2016” and “#TeamUSA”. Official sponsors can do so, but those not authorised must watch out.

Ok, that is great for lawyers, but what does this actually mean for you? In an Olympic year, the question for many businesses is “Can I put the Olympic marks on my products?”. Admittedly, when the host country is your own, as in the last Olympics, the hype and potential for cashing in will be much higher but, generally, the Games generate excitement and “Olympic” branded goods are popular and in high demand.

So what are the boundaries? The bottom line is the prevention of unauthorised commercial use, basically, using another’s successful brand for your own gain. Generally, private or personal use of the marks is tolerated but, where a profit is been made, there is a dedicated team of lawyers waiting to pounce. Even using a poster of a former Olympian could violate the marks, and that is before you even begin to consider the individual’s image rights and any copyright issues relating to the image.

So the best basic advice I can give is to take care and, if in any doubt, either don’t do it or seek specialist advice.

Ailsa Pemberton

Ailsa Pemberton

Ailsa Pemberton
Head of Intellectual Property
DD: 0113 227 9260

Posted in Intellectual Property | Leave a comment

Happy Holidays – 8 Top Tips For Separated Parents

With the summer holidays here and the sun finally shining, we can all look forward to some relaxed time with friends and family. For separated parents though it is not simply a case of stocking up on ice lollies and digging out the sun cream. The summer holidays can bring a host of complications, requiring a lot of planning and a good dose of compromise. The division of the holidays will need to be agreed in advance, which can sometimes be challenging with an ex-partner.

If you find yourself full of dread at the prospect of negotiating summer plans, Blacks’ family law team can help, with our top tips for a peaceful summer break.

  1. Plan early – Children like to know what is happening and need a sense of routine. As tempting as it may feel to put off making plans, you need to start talking early, laying down some firm plans about who will be where, when and with whom. Good planning is the key to ensuring that everyone, most of all the children, can enjoy a relaxed summer break.
  1. Be flexible – As much as any work commitments allow, try to remain flexible when negotiating spending time with the children in the summer. If you can maintain good communication and compromise with the other parent early on you will be setting the tone for a good working partnership.
  1. Don’t compete – Competing as to who can take the children away for the best holiday or day out is not a good idea. If there is a financial imbalance between you as parents, do not use this as a bribing tool with the children.
  1. Maintain communication – It can be difficult for children to be away from the parent staying at home. Be prepared for this by agreeing when and how contact will be maintained. Young children may want to speak to the other parent regularly and this should be arranged in advanced. Emails and texts are great for older children. Helping your child buy a holiday gift for the other parent is  a good way to encourage their relationship as well.
  1. Be fair – Stick to the arrangements that have been agreed. If you need to make any changes communicate with the other parent as soon as you can so that adjustments can be made.
  1. Be organised – Before leaving for a holiday make sure you provide the other parent with contact numbers, copies of passports, travel details and details of your accommodation.
  1. Obtain consent
  • If you are travelling abroad and there is no court order in place then you will need written permission from the other parent with Parental Responsibility which you should carry with the children’s passports. A signed letter is usually sufficient and this should contain the other parents contact details and the details of the holiday, although you may need to have this prepared by a Notary Public as some countries require the same.
  • If it is not possible to get consent then you may need to consider making an application to court for a Specific Issue Order.
  • If there is a court order in place which says the child must live with you then you can take a child abroad for 28 days without getting consent from the other parent, however, it would be sensible to travel with a copy of the court order.
  1. Take advice and keep calm – If you find yourself faced with a complicated situation, struggling to keep your cool; take some advice. We are happy to talk you through your options to help you find a resolution.

Anna RhodesAnnaRhodes
Family Team
0113 227 9251

Posted in Family Law | Leave a comment

Is now the time for the Aviva Premiership to be ‘ring-fenced’ – Part I?

Earlier this week a new deal worth £225 million between the Rugby Football Union (RFU) and Premiership Rugby was announced, but where does that leave Championship rugby with play-off rugby only guaranteed until the end of this season?

The thrilling two-legged RFU Championship final from last season saw Bristol seal their return to the Aviva Premiership following a seven-year absence scraping past Doncaster Knights 60-47 on aggregate over the two legs.

The Knights outscored Bristol 5 tries to 2 winning the second leg 34-32 but could not overcome the damage that was done in the first leg.

Bristol had finished as league leaders in the Championship’s regular season in 2010, 2012 and 2014, losing in the play-offs each time. Premiership Rugby and the RFU possibly breathed a collective sigh of relief that the West Country powerhouse were the team to return to top flight action and not the South Yorkshire minnows.

Had the Knights been promoted, would they have been doomed to fail? Due to the way English rugby is structured, one could speculate that they would have followed the plight of the London Welsh 2014-15 squad who only managed to collect a solitary bonus point in a disastrous campaign, rather than the current Exeter Chiefs side that reached the Premiership final following promotion to the Premiership six seasons earlier. The parallels between the hypothetical Knights promotion and London Welsh’s are as follows:

Firstly, the Knights home ground Castle Park in Armthorpe would not have met Premiership criteria which would have seen them lease the Keepmoat stadium from their footballing neighbours Doncaster Rovers. With an attendance for the first-leg of the championship playoff final of under 5,000 there would have needed to be a serious bolster in the fan base to raise ticket revenues to overcome the cost of leasing the Keepmoat.

Secondly, the Premiership has a three-tier share system which rewards the clubs who have spent the most seasons in the Premiership. The Premiership has a shareholding system where teams receive ‘B’ shares on their promotion to the league, followed by five ‘A shares’ for every year they remain in the league up to a maximum of 40 ‘A’ shares after six seasons in the top flight. For each season a club falls outside of the Premiership they lose five ‘A’ shares.

All 12 Premiership clubs get ‘B’ shares automatically but clubs must be in the league for two seasons before they earn the right to purchase ‘P’ shares, which are the most lucrative, from the club who have been relegated to the Championship. Exeter are the last side to have been promoted from the Championship who purchased P shares, for £5 million from Yorkshire Carnegie.

Had the Knights achieved promotion they would have received substantially less central funding than some of the long-standing Premiership outfits. No fan of the game wants to see a club go through what London Welsh did two seasons ago.

The Aviva Premiership is a closed shop in practice, as the clubs holding ‘A’ shares will have a greater advantage then an aspiring club such as Jersey or Ealing with no such shares. Is it time for Premiership rugby to simply ‘ring-fence’ the competition as no club beyond newly relegated London Irish would have the financial backing to overcome the head start that the current Premiership roster of sides has?

In the second instalment of this two-part blog series I will explore why a ring-fenced Premiership might not be such a bad idea in light of the Championship’s “full-time” identity crisis.

Andy Boyde

Andy Boyde

Andy Boyde
Sports Law
0113 227 9319

Posted in Sports Law | Leave a comment