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

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”. 
 

Inheritance Tax (IHT) Nil Rate Band

This note is for the assistance of clients who may be concerned as to the extension of the Nil Rate Band, following the publication of the 2007 Pre-Budget Report on 9 October 2007.
 
Who is most likely to be affected?
 
Married couples, widows/widowers and civil partners in the first instance. Following the death of any individual comprising the groups mentioned, his or her personal representative may be required to take appropriate action.
 
What does the legislation intend?
 
With effect from 9 October 2007, a claim can be made to transfer any unused IHT Nil Rate Band on a person’s death to the estate of their surviving spouse or civil partner who dies on or after 9 October 2007. This relief will apply where the IHT Nil Rate Band of the first deceased spouse or civil partner was not fully used in calculating the IHT liability of their estate. When the surviving spouse or civil partner dies, the unused amount may be added to their own Nil Rate Band. It does not matter if the estate of the first spouse (or civil partner) to die was negligible, the claim to transfer the unused IHT Nil Rate Band will still apply. 
 
Is there a “cut off” date as to the death of the first spouse, or civil partner, to die?
 
Whilst inheritance tax legislation has applied since 18 March 1986, it appears, if applicable, that a death of the first spouse, prior to 18 March 1986, would also apply.
 
What is the position where part of the IHT Nil Rate Band was utilised on the death of the first spouse or civil partner?
 
The amount of the Nil Rate Band potentially available for transfer will be based on the proportion of the Nil Rate Band that was unused when the first spouse or civil partner died. The following examples will illustrate the position:
 
(a)             On the first death, none of the original Nil Rate Band was used because the entire estate was left to the surviving spouse. Then if the Nil Rate Band, when the surviving spouse dies is £300,000, that would be increased by 100% to £600,000.
 
(b)             If on the first death the chargeable estate had been £150,000 and the Nil Rate Band then applying was £300,000, then 50% of the original Nil Rate Band would be unused. Subsequently, if the Nil Rate Band when the surviving spouse dies is £350,000, then that would be increased by 50% (viz, £175,000) making a total Nil Rate Band available to the surviving spouse of £525,000.
 
Who is responsible for making the claim?
 
Where these new rules have an effect, the personal representatives do not have to claim, for the unused Nil Rate Band to be transferred, at the time of the death of the first spouse or civil partner to die. Any claims for transfer of unused Nil Rate Band amounts will be made by the personal representatives of the estate of the second spouse or civil partner to die when the personal representatives render an IHT account for probate purposes (CAP Form 200 or 205).
 
Summary
 
The practical effect of this legislation is that for those widows/widowers (and civil partners since December 2005), they can now claim (through their personal representatives) the IHT Nil Rate Band that may have been unused on the death of the first spouse or civil partner. The key point to understand is that no matter when the first spouse or civil partner died it is the Nil Rate Band applying at the date of death of the second (surviving) spouse or civil partner.
 
The Nil Rate Band applying for 2007/2008 is £300,000 and this will rise to £350,000 with effect from 6 April 2010.
 
The maximum amount of the Nil Rate Band applying to a surviving spouse or civil partner would be £600,000 for tax year 2007/2008 rising to £700,000 for tax year commencing 6 April 2010.
 
This is a positive saving and should take out of the chargeable IHT “net” a sizeable proportion of the estate or, alternatively, reduce significantly the balance of the survivor’s estate that may be chargeable to IHT.

For further information please contact Andrew Murdoch, Associate Solicitor on am@lockharts.co.uk.