VAT Liability and Partnership Deeds

From 1 May 2007 partnerships have to register for VAT if they exceed or are likely to exceed the VAT registration threshold, which is currently £67,000, in respect of certain classes of services. Recent information from HMCE appears to indicate that where a VAT liability arises in respect of such services, it should be made clear whether the VAT liability falls on either the partnership or the individual partner providing the services. If this is not clarified in the Partnership Deed it appears that HMCE will deem the liability to fall on the partnership. This may result in the practice reaching the level where registration for VAT payments is necessary, which would not otherwise have been the case.

It is of course a matter for the practice as a whole as to how liabilities should fall but Ros Parkin – rap@lockharts.co.uk will be happy to advise on changes that may be necessary to practice Parntership Deeds.

Partnership Issues

While it is the wish of every partnership that things run smoothly, there will always be occasions when circumstances pose problems for your business, its partners and its employees. Whether you are an existing partnership, or contemplating the formation of a new firm, it is essential that you take appropriate advice as these circumstances dictate.

Whether a problem arises out of a dispute over the nature or interpretation of your partnership agreement, your employee's rights and obligations, a matter relating to professional discipline, or a combination of several issues, it is crucial that you deal with it effectively and efficiently.

Lockharts have considerable experience and expertise in acting for partnerships and are able to offer legal advice in the following key areas.

Partnership law

Drafting of partnership agreements for partnerships or LLPs,
Fixed price partnership agreement assessment,
Advising on the meaning and enforceability of clauses in existing Deeds,
Developments in the law such as the extension of the applicability of the Age Discrimination legislation to partnerships.

Partnership Disputes

Negotiations and settlements when Partners retire voluntarily or compulsory,
Advice on internal partnership disputes, dissolutions and expulsion of partners,
Acting on behalf of partnerships and individual partners in ADR, mediation, arbitration and Court proceedings,
Advising on the enforceability of restrictive covenants, including acting to obtain injunction applications.

Employment law

Drafting of employment contracts, staff handbooks and employment policies,
Advice on unfair dismissal, disciplinary and grievance procedures, redundancy, discrimination and business transfers (TUPE),
Advice on dispute resolution and compromise Agreements,
Representation and advice on claims before the employment tribunal,
More information.

Disciplinary and Fitness to Practise Issues

Legal assistance to practitioners who are being or may be investigated or charged with a disciplinary offence by their professional or regulatory body,
Preliminary advice for practitioners who have been contacted by their regulatory body,
Representation for practitioners who are being investigated or subject to disciplinary hearings before a panel or Tribunal,
Combined experience of working almost exclusively with professional practitioners with expertise in partnership law, regulatory law and litigation,
Membership of the Association of Regulatory and Disciplinary Solicitors.

Property law

Commercial business sales and acquisitions,
Leases and premises development,
Re-mortgaging and co-ownership,
More information.

Intellectual property

Advice on trade marks,
Registrations at home and abroad,
Passing-off and infringement,
Assigning and licensing trademarks,
Advice on internet domain names,
More information.

Whether or not your partnership issue appears to come under any of the above, please do contact our Head of Partnership Rosalind Parkin who will be happy to discuss your concerns with you.

Partnership Issues

Changes in Capital Gains Tax (CGT)

Chancellor of the Exchequer Alistair Darling announced in the pre-Budget report that the rules on capital gains tax (CGT) will change from 6 April 2008. The current system of taper relief allows investors to pay just 10% on investments held for two years. In place of the taper relief, Mr Darling is introducing a new flat rate of 18%. He has intended to raise additional taxation to target private equity investors, who have been described as ‘paying less tax then their cleaners’. The details of how this is to be done were not precisely spelled out.

The net effect will be to set back the growth of the economy over coming years, by discouraging longer term investment and risk-taking. This will hit all businesses in the UK and reduce the tendency for entrepreneurs to start new businesses. The previous arrangements encouraged entrepreneurs to take higher risk and the tax system rewarded them accordingly. The changes lead to expectations that many business owners will sell up in the period up to 5 April 2008, as people make sales to avoid much larger tax bills.

This compares with the CGT position on disposal of personal assets. The current effective rate is 24%. With the flat rate of 18%, general investors in shares and those with buy-to-let or second properties will find their position improved. No holding period will be required to benefit from this new rate.

Despite the new flat rate in CGT, Mr Darling said that the UK would remain “one of the most competitive single rates of any major economy”.

Judicial Review Proceedings - 9 May 2007

The BDA, represented by Lockharts, has supported a successful use of judicial review proceedings against the NHS Litigation Authority. The case, which was heard on Wednesday 9th May, concerned a dentist who was awarded a zero valued general dental contract by a PCT under the Transitional Provisions Order 2005 (TPO 2005). The dentist did not work for Hillingdon PCT during the test period but was in contract with the PCT as at 31st March 2006 and accordingly was entitled to a general dental contract. In awarding only a zero contract value, the PCT believed it had absolute discretion to award whatever contract value it thought fit. On appeal, the Litigation Authority (LA) took the same view. The dentist then applied to the Administrative Court for judicial review. The BDA intervened in support of the dentist.

Following an indication from Mr Justice Goldring, the LA accepted that it had acted unlawfully by not taking account of the requirement on the PCT to have regard to the information in its possession (Article 10(7) of the TPO 2005- notably in this case the dentist's GDS activity between October 2005 and March 2006. Subsequently by a Consent Order, the matter has now been referred back to the PCT to award a contract value having regard the dentist’s GDS activity and all other proper considerations. The dentist was awarded costs.

Although the case was successful in having the LA’s determination quashed, the principles are particular to TPO 2005 cases where a dentist has not worked during the test period. Significantly, there has not been a determination in this case that a zero contract value is in itself unlawful nor that a contract value in cases such as this should directly correspond with activity outside the baseline period. Nevertheless, the Court has indicated that, in such cases, it may be possible to infer from an unreasonably low contract value that a PCT has not had adequate regard to proper considerations.