Land or buildings with potential development value – Keep or give away?

Anyone owning land or buildings may have from time to time considered the potential for development.  From a financial planning perspective, if the potential for development will increase the value (known as hope value) once planning permission is obtained the hope value is realised and scope for planning has passed. 

Before planning permission is granted it is worth considering whether it makes sense for the land or building to remain in the hands of the current land owner or whether this is an opportunity to give assets away in a tax efficient manner.  There are also problems and tax implications if a land owner dies holding land with the benefit of planning permission or with contracts exchanged on the sale or with cash already in the bank.  Often land or buildings in this situation may, prior to the grant of planning permission, have qualified for 100% relief, either agricultural property relief or business property relief, and this will be lost if the proceeds of sale are retained in cash or reinvested in an asset which is not a qualifying investment for tax relief purposes. However an urge to rapidly reinvest may lead to peril as there are risks in reinvesting the proceeds.  Too hasty an investment may be made in the wrong type of asset and therefore create problems in the future for management etc of the venture.  Alternatively the purchase of the asset may change the nature of the business from a trading enterprise, which would be likely to qualify for 100% business property relief, into one of holding investments which would mean that business property relief would be lost on the whole enterprise. 

It is worth considering whether it is sensible to give assets with potential development value away well before planning permission is realised.  Capital gains tax at either 18% or 28% will be paid on the lower value at the time of the gift but the gain in value on the issue of planning permission will be borne by the recipient.  The decision as to whether to retain an asset or to give it away may well depend on timing.  If the land owner is unlikely to be alive when planning permission is granted then it may be better to retain the asset, this would mean paying inheritance tax if applicable, but hopefully the asset would qualify for 100% relief in the hands of the deceased land owner. The base value would be uplifted to the market value at the date of death which would be of benefit to the recipient when it comes to paying capital gains tax on the subsequent disposal particularly if the asset had been owned by the deceased land owner for a long time and would otherwise have had a low base value. 

PIP implants – who should pay the legal costs?

A French manufacturer is accused of using industrial silicone for breast implants and thousands of patients are worried about what happens if they rupture. 

The manufacturer has gone out of business; the French government has offered to replace all of the implants for French patients; the British government has said that the NHS should replace the implants wherever the original procedure was under the NHS and has suggested that private clinics should do likewise. 

The government’s response on the face of it seems reasonable – why should the patients themselves suffer unnecessary anxiety and expense?  The cost should be met by the medical provider.

If patients have to seek legal advice and pay a solicitor to persuade the private clinic to pay the cost of replacing the implants or indeed, if appropriate, to persuade the private clinic and/or the NHS to compensate them for the additional surgery injury and any injury caused by the rupture, who should pay the legal costs?

The current position is that if the patient is successful, the costs should be paid by the medical provider. 

However,underthe Government’s proposed changes to litigation funding a patient who successfully claimed in these circumstances, would have to pay up to 25% of the compensation she received, and would, in addition, have to meet the cost of any ATE insurance policy.

If the government accepts that the cost of remedying the PIP mess should be met by the medical providers, why shouldn’t the same principle apply to the patient’s legal costs? 

Equally, if a patient successfully establishes that they have been harmed by unacceptable medical treatment, should not the party that caused the problem meet all of the legal costs?

If the Government’s proposed changes become reality, patients, such as those affected by the PIP scandal, are likely to either be put off obtaining legal advice in the first place or will no longer receive the compensation they are entitled to.   The same point applies for all patients that have to take legal action following problems with their medical treatment. 

H M Revenue & Customs late filing and penalty payments

Since 6 April 2011, new self assessment late filing penalties came into force. If you are required to file a tax return, this should be submitted to H M Revenue & Customs by 31 October following the end of the tax year, if you are submitting it in paper form or by 31 January if you are submitting it online.

If your paper tax return is submitted after the paper filing deadline or your online tax return filed after 31 January you will be issued with an automatic £100 penalty. In the past these penalties had been mitigated by the tax outstanding at 31 January, so if you filed your paper tax return after 31 October, but there was either no tax to pay or all the tax had been paid by 31 January of the following year, then the late filing penalty was reduced to nil.  This is no longer an option and a tax return where no tax is due for the year will attract a £100 penalty if filed even one day late.

In addition, the penalties have increased for continuing failure to submit a tax return. If the tax return is three months late an automatic penalty of £10 per day, up to a maximum of £900 will be applied. Further penalties of the greater of 5% of the tax due or £300 will be charged for returns over six months late and for returns over twelve months late a further penalty of the greater of 5% of the tax due or £300 will be charged.

Trustees should also be aware that they are not able to file a trust tax return online without paying to use third party software. At Tees Solicitors we are able to submit your trust tax return online using our software whilst providing you with our expert advice and experience.

If you require any assistance with completion of your personal or trust tax return, please contact a member of our trust accounts team who will be pleased to assist you.

Don’t hand over additional funds to H M Revenue & Customs if you don’t have to!

Tees Family Mediators - here to guide couples along the rocky path of divorce and separation

Family mediation is now indisputably recognised as a mainstream and effective process for separating or divorcing couples seeking to resolve any issues between them out of court  in a neutral, supportive environment through an impartial mediator.

Mediation is firmly supported  and recommended by the Family courts, as judges are the first to acknowledge  that a skilled family mediator can often cut through entrenched and bitter disputes and help couples broker a deal, without months of court litigation have driving a larger wedge between them.  Attending mediation can reduce costs for the couple and any children of the relationship are likely to benefit from a calmer relationship between their parents, whether or not the disputes relate directly to children issues. 

From April 2011, a new protocol in the Family courts came into being alongside  the Family Procedure Rules 2010. The protocol strongly recommends (but does not compel)  any person wishing to apply to court on children or financial issues to at least attend a Mediation Information and Assessment Meeting (MIAM) to consider whether mediation could help them, unless they fall within a very narrow band of exception.  If a person ignores this requirement, then a judge can at a later stage call a halt to court proceedings and adjourn these to direct  the parties to try mediation.

Many couples are now self-referring themselves to experienced family mediators as a first port of call.

Family Mediation  : a summary

·        it is a voluntary process into which no one can be forced  

·        the mediator is  impartial and this holds the advantage of helping a couple move forwards by focussing on solutions. 

·        Mediation is a structured, step by step  process which can assist couples resolve all types of issues:  financial , maintenance, property on divorce, pensions , practical arrangements relating to children.

·        The mediator

(a)  provides information in a neutral way, including on legal matters but no advice.

(b)   helps the couple to identify what issues need to be resolved and what information is needed from each to be able to do so.

(c)  guides the couple as to what financial disclosure might be required

(d)  uses skills to encourage the couple to open up ranges of options, amongst which a solution can be found

(e)  helps break impasse and deadlock using specialist skills

(f)    steers and guides the process  – but the couple remain in charge of their own outcome and solution.

(g)  records in written format the outcome of mediation so that the couple can take this away with them to their solicitors to formalise a legal agreement.

·        Mediation can be used at any stage to resolve issues and is effective before considering court applications

·        The couple pay the mediator’s fees jointly

Contact one of our family mediators for a no obligation discussion  in confidence  -

mediation@teeslaw.co.uk

We mediate in : Bishops Stortford, Cambridge, Chelmsford, Saffron Walden, Great Dunmow & Northampton

Tax Efficient Giving

December is often a time for making gifts and with planning the gift may also save inheritance tax (IHT).  Generally you must survive a gift by seven years before its value is outside of your estate for IHT.  However there are some gifts that can be made without having to worry about the seven year rule:

●          You can give away up to £3,000 in total in each tax year and this £3,000 will be exempt from IHT on your death.  You can also carry forward any unused part of the £3,000 annual exemption to the following tax year.

●          Generally, you can also make any number of cash gifts not exceeding £250, for occasions such as Christmas or birthdays, to as many different people as you wish in one tax year.

●          If a relative or friend has announced they are getting married or entering into a civil partnership then you can make a gift to them which will be exempt from IHT either before or at the date of the wedding or ceremony.  Parents can each make gifts worth up to £5,000, grandparents and great-grandparents can make gifts worth up to £2,000 and anyone else can make gifts worth up to £1,000.

●          You can make any number of gifts to charity, whatever their value, and they will be exempt from IHT. Income tax relief is also available to higher rate tax payers who gift aid their cash donation to charity.

If you are interested in tax efficient giving and want to know more contact our Wills, Trusts & Probate team for further advice.

Addenbrookes' Surgeons make four catastrophic errors in six weeks

It has been reported that there have been four “catastrophic” surgical errors at Addenbrooke’s hospital in a six week period, causing the medical director of Cambridge University Hospitals NHS Foundation Trust, Dr Jag Ahluwalia to state “I hang my head in shame". 

One of the incidents related to the leaving of a 36cm mat inside a patient’s abdomen following surgery; another involved operating on the wrong eye of a patient; another involved leaving a microvascular clamp in the patient’s body and in the fourth case, the surgeons operated on the wrong side of the patient’s body. 

These incidents are described by the hospital as “never events”.  In other words, these incidents, which carry the potential for lasting damage and trauma to those affected, are basic errors that could have been avoided if simple measures had been taken, such as the correct use of a checklist. 

Dr Ahluwalia stated that no patient came to “permanent harm”.  However, each patient will require a further operation, an otherwise unnecessary procedure. 

It is clearly a worry that a teaching hospital with an international reputation at our doorstep is facing such problems. 

We have acted for many people following surgery, which has had a poor outcome, and recognise the devastation which this can cause. 

If you or anyone you know has been affected by surgery which has gone wrong or any other aspect of medical negligence, please do not hesitate to contact our medical negligence team.  We are happy to offer some initial constructive, friendly, confidential advice, free of charge.

Rule change on French Assets

Recent legal reform in France has resulted in major changes to the Capital Gains tax regime and you will find below a summary of the regime itself together with the recent amendments.

Capital gains tax in France (namely impôt sur les plus values) is a tax payable on the sale of fixed assets (land or buildings) as well as on other movable assets (such as shares).

The tax is applied on the gain made by selling the property, i.e. the difference between the purchase price and the selling price. The tax is calculated at the time of the sale by the French Notaire and deducted from the proceeds of the sale.

The applicable tax rate depends on your country of residence, i.e.:-

-       If you are a French resident, the applicable tax rate is 32.5% (updated in 2011). This figure is composed of the capital gain tax rate itself (which is 19%) plus 13.5% of social charges;

-       If you are an UK Resident, then the applicable tax rate is only 19%, as no social charges are payable. However, be aware that you may then be liable to capital gains in the UK following the declaration made in France (the French tax office is likely to pass on any information they have to the Inland Revenue, relating to your sale or other French tax affairs). Nevertheless, in accordance with the Anglo-French Double Tax Treaty, you can offset the amount of any French capital gain tax paid in France against the capital gains bill in the UK;

-       Those who are neither resident in France nor the EU will be taxed at the rate of 33.3%.

However, there are a number of significant exemptions and allowances from French capital gains tax on the sale of immovable assets.

By far, the most important exemption concerns the principal residence. However, in order for the property to qualify as your principal residence, you need to have been occupying it on a habitual basis (although you do not need to be occupying it at the time of sale). The law does not state how long you need to have occupied the property but the tax authorities will require evidence to determine whether it was in fact used as your main residence (such as utility bills in your name, whether you have made an income tax declaration at this address, if you are able to produce a taxe d’habitation in your name, etc.)

The other exemption concerns the duration of ownership. However, this has been recently amended with the Law n°2011-1117 of 19 September 2011. Until now, a tax rebate of 10% on the capital gains was applied every year following the fifth year of ownership, which resulted in a total exemption of capital gains tax after 15 years. Under the new regime, with effect from 1st February 2012, the 15 year rule is replaced by a less generous one over 30 years. A summary of the new allowance is detailed as follows:

·         No allowance for the first five years of ownership;

·         Between six and sixteen years of ownership: 2% allowance per year;

·         Between seventeen and twenty-four years of ownership: 4% allowance per year;

·         Between twenty-five and thirty years of ownership: 8% allowance per year;

·         Then, at the end of 30 years, there is a complete exemption.

The date 1st February 2012 means that in order to qualify for the previous allowances, the deed of sale (acte authentique), and not the first contract, e.g. compromise de vente, would need to be signed by 31st January 2012.

However, with regard to transfers of properties to an SCI (Société Civile Immobilière), the law is retrospective and is applied from 25^th August 2011.

As mentioned above, the capital gain is determined by the difference between the sale and purchase price. However, some expenses can be taken into account in order to reduce the figure and this has not been amended with the new regulation. Those expenses concern:-

·         All the costs incurred by the seller, such as estate agent fees and other mandatory fees;

·         The expenses related to the purchase price and incurred by the purchaser at the time of purchase such as Notaire’s fees and stamp duties (these are set at 7.5% of the purchase price but can be itemised if they are greater);

·         All costs incurred by the owner associated with construction, extension or improvement to the property during his ownership.

As regards the latter, only building works carried out by a building professional are eligible (i.e. building professionals properly registered in France), and therefore if you have undertaken the works yourself, you cannot obtain tax relief on the costs. You will be required to produce invoices in support of any building costs. In the event that these are not available, provided you have owned the property for at least five years, the notaire is able to apply an allowance of 15% on the acquisition price against improvements to the property (but not to land).

In addition, there used to be a 1000 Euros allowance which was applied automatically but this is no longer available under the new Law.

Research finds that patients are at a higher risk of death if admitted to hospital out of hours

Recent research has suggested that patients admitted to hospital over the weekend are  more likely to die than those admitted from Monday to Friday (http://www.bbc.co.uk/news/health-15895663). 

The author of the study, Dr Foster, found that two of the key factors that could contribute to higher mortality rates outside of normal working hours are:

• ·         reduced specialist in-hospital services being available out-of-hours, particularly diagnostic investigations such as MRI scans; and
• ·         different out-of-hours staffing levels (for example, out-of-hours consultants are normally on call rather than on site and immediately available in the hospital)

Paul Taylor recently assisted the family of a young man admitted to hospital with chest pain on a Monday afternoon, who tragically died the next morning.  He had suffered an undiagnosed dissection of his aorta. 

The patient was initially assessed by an F2, was assessed and admitted by a Specialist Registrar and was later seen by an F1 - but he was never seen by a Consultant.  Although there was a Consultant on-call, overnight, the junior doctors did not recognise that a more senior opinion was required. 

Also of note, a chest x-ray taken in the early evening was reviewed by the junior doctor but not by a radiologist until the following morning (in fact after the patient had died). 

The Inquest heard that a more experienced, senior doctor would have recognised the warning signs and symptoms, made the correct diagnosis and that the patient’s death would probably  have been avoided.  The Inquest further heard that whereas x-rays would normally be reviewed by a radiologist within 2 or 3 hours, x-rays taken late in the afternoon or during the evening would not routinely be reviewed by a radiologist until the following morning. 

At the conclusion of the Inquest, the hospital agreed to conduct a detailed review and take specific steps in order to improve out-of-hours patient care.  These included reinforcing upon junior doctors the importance of seeking advice from senior doctors; considering (amongst other steps) the extension of radiology cover round the clock; and moving to greater involvement of Consultants. 

These are difficult issues and require the careful balancing of resources.  The pressures on hospitals are likely to become greater in the current economic climate but it is important that steps are taken to ensure that, as far as possible, there is a high level of patient care around the clock, seven days a week.

Following the Inquest, Paul Taylor secured settlement of the family’s medical negligence claim for an undisclosed sum. 

Why get a Pre-Nup?

In the current economic climate wealthy individuals are recommended to seek financial and tax advice about how best to protect their assets from the continued downturn.

However with the UK marriage failure rate statistically as high as two in five, should individuals consider at the outset the financial consequences if their relationship later breaks down?

Current matrimonial law, allows the Family Courts to take a wide view on what assets should be divided between the parties in the event of a Divorce, which could include businesses owned before the marriage, inheritances or wealth accumulated due to one party's efforts.

In England and Wales, the general understanding had been that agreements entered into prior to marriage and which attempted to regulate a financial settlement on a Divorce (a “Pre-Nuptial Agreement") were not enforceable. However after a Home Office Consultation Document called “Supporting Families” was published in November 1988 there has been a gradual shift in Judicial thinking. This has been particularly apparent over the last few years as the family Courts have increasingly recognised the importance of Pre-Nuptial Agreements and the role they have to play in matrimonial proceedings.

The progression of the law in this area culminated in the case of Radmacher v Granatino in 2010, which although failed to endorse Pre-Nuptial Agreements as legally binding, created a presumption in favour of giving effect to them. This presumption was to be applied provided the Pre-Nuptial Agreement was “freely entered into by each party with a full appreciation of its implications, unless in the circumstances prevailing at the time it would not be fair to hold the parties to their agreement“.

In ascertaining the status of a Pre-Nuptial Agreement the Courts will now look carefully at all the circumstances surrounding the making of the Agreement to determine the weight to be provided to it and whether it is fair to hold the parties to it.

From a legal point of view it must be acknowledged, many of the cases involving Pre-Nuptial Agreements which have recently been determined involved marriages of relatively short duration. For example in Radmacher the marriage had lasted 8 years.

With short marriages the question of contribution is usually a relevant factor when determining a financial settlement. Assets are not necessarily divided on an equal basis. This means the Court is more likely to feel it appropriate to uphold the terms of a Pre-Nuptial Agreement, which seeks to try and restore the parties to the positions they were in prior to the commencement of their marriage.

It is yet to be seen what approach the Court may take to a Pre-Nuptial Agreement where there has been a long relationship of say 15 to 20 years preceding the Divorce, particularly as the question of contribution becomes less persuasive as the length of the marriage increases.

Despite the fact Pre-Nuptial Agreements are not legally binding as a contract, they are now recommended as a means of assisting asset protection within marriage, in the event of subsequent relationship breakdown.

If you think any of the issues might apply to you please contact any of our solicitors in our Divorce and Family Law team.

“The cheque is in the post”

Are you missing out?

Almost all organisations experience some delay in payment of their invoices. But what should be done with the cases that go beyond the tired excuse “the cheque is in the post and must have been delayed or gone astray”?

Good credit control procedures will possibly mean that you issue regular reminders and chase the debtor for payment.  However, with some bad debtors the situation can be such that there is no alternative to either writing off the debt (and the time and effort since the invoice was issued plus any interest claim) or commencing court proceedings. 

If you find yourself in this position are you aware of the full extent of your permitted claim? Or are you still missing out?  The UK Government introduced late payment legislation in 1998 and this was subsequently amended on 2002 bringing additional benefits to businesses.

The Late Payment of Commercial Debts (Interest) Act 1998 allows businesses to charge interest on late payment of commercial debts.  A creditor is entitled to seek the Bank of England reference rate plus 8% p.a. which currently equates to a final interest claim at 8.5% p.a.

Not only can interest be claimed on the debt at attractive increased interest rates but the legislation also allows a creditor to claim reasonable debt recovery costs.  This compensation entitlement varies in accordance with the size of the unpaid debt.

If you think you may have cause to claim under the above provisions or would like any further information on this article or any related matters please contact our Commercial Litigation team.