Commercial Client Reference Articles

Dealing With Breach of Patent

When you discover that a business has breached your patent, what should you do?

The answer to this question has two elements. The first is based on what you can do in law and the second is based on business strategy.

Firstly, before picking a fight with anyone over such a matter, it is important to make sure that you are on firm ground, so do your research carefully. Make sure there is a real infringement and that the infringement is in a market in which your patent applies.

In law, if a business infringes a patent, it is liable to pay damages to the patent owner, which will be based on the loss suffered by the owner. In theory, losses suffered will be compensated for but, in practice, allowing an infringement to continue while you negotiate with (or sue) the infringing business is a high-risk strategy. In most cases, especially where the effect of the patent infringement is severe (for example, where its use directly affects your sales), it is likely that you should send a legal notice to the offending business requiring it to cease the infringement immediately.

This will normally produce one of the following responses:

1. The infringer will agree, cease the infringement and (hopefully) enter into discussions with you about the appropriate payment to make to you by way of compensation. Regrettably, this is not the most common response.

2. The notice will be ignored. In this case, the infringer either hopes that your letter is a bluff and you will not take legal proceedings or believes that it has not infringed your patent and would win that argument were the matter to come to court. Under these circumstances, it is doubly important to do your homework and make sure of your position as legal proceedings are likely to be necessary.

3. Your notice will be met with a denial from the infringer (and occasionally a counter-claim that one of your products infringes its patent). In this case, there is a fight there if you want it (or sometimes even if you don’t).

No matter what the response, in the majority of cases the most satisfactory outcome will usually result from negotiation with the benefit of expert advice, rather than court proceedings. Commercial considerations must be kept at the forefront and it is normally advisable to leave the door open to a negotiated settlement. This is especially so as one of the common outcomes of such disputes is the creation of a licensing agreement, which will require specialist legal advice.

See guidance from the UKIPO.

VAT on Business Assets With Private Use

It is very commom for a smaller business to have assets which have been acquired which are used for both business and private use.

Traditionally, this could be dealt with either by claiming only the percentage of the input VAT which corresponded to the percentage of business use or by claiming all the input VAT and then making a VAT charge (i.e. adding to the output VAT payable) for the private use on an ‘as you go’ basis. This latter method is called ‘Lennartz accounting’, after the VAT case that established the principle.

Following a Dutch VAT case, however, the use of Lennartz accounting has been considerably restricted.  HMRC 's current guidance on the correct  VAT treatment in such cases  is updated periodically.

Following Brexit, it is almost certain that VAT legislation will change significantly, although how such changes will manifest themselves is not yet known


Tax Free Perks

The Government has continuously sought to limit the tax free perks that businesses can provide for their employees. However, there are some remaining. Here is an update on some of those still available.


Childcare provision and childcare vouchers up to a weekly maximum 'appropriate amount'. The system has changed for new entrants to an employer scheme from April 2011. See details here.

 The childcare tax allowance scheme  came into effect in 2015.

Mobile Phones

There is no benefit in kind on the provision of a mobile phone to an employee, although this can prove an expensive perk to provide. If additional mobile phones are provided (e.g. where they are given to family members also), only one is exempt - you can choose which one.

Homeworking Expenses

Employees can be paid up to £3 per week (unchanged since 2008/9) to cover the extra costs of working from home (not including business telephone calls). No receipts need to be kept. Employees can claim amounts in excess of this allowance via their tax return; however, evidence of the amounts spent will be required.

Staff Entertainment

No benefit in kind is chargeable on Christmas Parties and other employee functions, up to a maximum of £150 per head. The function has to be an 'annual event' and open to all employees to qualify for the exemption. The rules where more than one such function is held are complex - see HMRC's guidance for further information.

Subsidised Canteens

Subject to certain conditions, subsidised canteens create no taxable benefit. Luncheon Vouchers up to 15p per day are tax free.

Subsistence Payments

You can pay employees up to £5 per overnight stay in the UK or £10 if the business trip is abroad. Allowable amounts for foreign subsistence are being reviewed in 2010/11. HMRC offers guidance on subsistence payment in the UK here and abroad here. These rates have been unchanged since 2014.


It is often forgotten that the use of a qualifying pool car is not a taxable benefit, nor is free parking at the workplace.

Payments for travelling expenses in connection with work can be made according to 'scale rates' published by HM Revenue & Customs (HMRC). There are separate rates for cars, motorcycles, and bicycles and even for passengers sharing a car.

Share Incentive Schemes

There are a number of share incentive schemes which can be used to provide tax free benefits. Share Incentive Plans allow companies to give up to £3,000 worth of 'free shares' each year to employees. Recently, the Government has annoucned its intention to restrict the terms of such schemes.

Long Service Awards 

Non-cash awards for long service are tax free for employers, as long as the award marks at least 20 years' service and the employee has not received any previous long service awards in the last 10 years. Benefits of up to £50 per year of service are tax-free: if the benefit is worth more than this, only the excess over £50 is taxable. 

Employers' Pension Contributions

Payments to approved pension schemes, on behalf of employees, are not taxable.

Interest Free Loans

Loans of up to £5,000 can be made to employees without attracting a tax charge on the notional interest.

Professional Subscriptions

These are not normally taxable when paid by the employer, as long as the organisation being subscribed to appears on HMRC's List 3.

Sports Facilities

These are tax free, provided they are available to all employees (and aren't available to the general public).

Removal Expenses

The relocation expenses for employees who move in connection with their work can be paid, subject to limits.

Providing tax free benefits in kind can be an excellent way to increase staff motivation and attract and retain key employees. Employers should look at the range of options open to them to tailor attractive remuneration packages for their staff.


Vouchers not exceeding £50 each in value may be given to employees in a tax year. The vouchers must not be able to be encashed.


Employed or Self-Employed?

Whether you are employed or self-employed makes a substantial difference to how you are taxed and the income tax liabilities of an employed person can be very different from those of a self-employed person with similar levels of gross income. The National Insurance liabilities of the employed and self-employed are also calculated differently and entitlement to benefits, such as Jobseeker’s Allowance, also varies depending on one’s employment status.

If you are an employee, your employer must normally pay National Insurance Contributions for you, operate PAYE on your income and enrol you into a pensions scheme unless oyu formally opt out.

It is therefore important for any working person to know their exact employment status. Sometimes, however, deciding whether someone is genuinely self-employed or an employee can be difficult and HM Revenue and Customs are unforgiving of those who ‘get it wrong’. However, they do produce fact sheets to help people make the correct decision.

Guidance from HMRC on the related tax issues can be found here

It is quite possible to set up a 'self-employed' relationship which is caught by the rules and will be treated by HMRC as an employer/employee relationship. The cost to the employer of having such a relationship 'redefined' as one of employment can be massive, so it is essential to make sure that any such arrangements are watertight. There is a special regime dealt with under IR35 which will bring some payments made to limited companies into the PAYE regime. 

In 2014 regulations were brought in to bring more contractors into PAYE to prevent the use of 'false self-employment' intermediaries, which typically involved schemes using an 'umbrella company' or an offshire company.

More recently, a number of employment law cases have been heard which deal with the employment status of people in the 'gig economy'. Whilst change in the tax law should be expected as a result, it is important to note that the tax law relating to employment status does not directly flow from the law from employment law purposes. In particular, the fact that someone may declare their own income and pay taxes as a self-employed person does not mean they are self-employed for income tax and national insurance purposes.

VAT - Place of Supply of Services

With different rates of value-added tax (VAT) applying throughout Europe, the place that a supply is made (and hence the VAT rate which is applicable) can be a very important matter.

The basic 'place of supply' rule is that in normal circumstances (and subject to some exceptions), the place of supply for a service is the place where the supplier 'belongs' – in other words, where they normally do business. However, this has caused considerable problems where the supply is one of services, not goods. Accordingly, the rules were changed on 1 January 2010, such that the basic rule for the place of supply of a service is now where the customer belongs if the customer is a business.

The place of supply rules are complex and should be understood fully if they affect you.

The rules relating to the place of supply of electronic products to non-business customers changed on 1 January 2015. See the HMRC website for details.

How to work out your place of supply.

Following Brexit, it is almost certain that VAT legislation will change significantly, although how such changes will manifest themselves is not yet known.

Cookie Law

The Privacy and Electronic Communications (EC Directive) (Amendment) Regulations 2011 require consent to be obtained for the use of cookies and similar technologies for storing information, and accessing information stored, on a user’s equipment, such as their computer or mobile phone. The Regulations came into force on 25 May 2011. However, the Information Commissioner’s Office (ICO) announced that organisations would be allowed a year-long period to work towards compliance with the changes. That grace period has now expired.

Previously, privacy rules only required websites to tell users about cookies they used and provide information on how to ‘opt out’. Most organisations did this by putting information in their privacy policy. The new rules require that in most cases websites wanting to use cookies must gain consent, which must involve some form of communication whereby the individual knowingly indicates their acceptance. The ICO made last-minute changes to its guidance on how to comply with the new cookie law in order to clarify the following points with regard to implied consent:

  • Implied consent is a valid form of consent and can be used in the context of compliance with the revised rules on cookies;
  • If you are relying on implied consent you need to be satisfied that your users understand that their actions will result in cookies being set. Without this understanding you do not have their informed consent;
  • You should not rely on the fact that users might have read a privacy policy that is perhaps hard to find or difficult to understand; and
  • In some circumstances, for example where you are collecting sensitive personal data such as information about an identifiable individual’s health, data protection law might require you to obtain explicit consent.

The regulations have been comprehensively updated by the General Data Protection Regulation (GDPR), which takes full effect on 25 May 2018. In effect, the GDPR will mean that any cookie which allows a user's device to be identified will be treated as being 'personal data' and this subject to regulation by the GDPR and specific consent will need to be given

A 'session cookie' exists only to make website functions work for the duration of a browser's session. These are anonymous and are not therefore wihin the scope of the GDPR.

Mixed Premises - Legal Status

Living ‘above the shop’ is quite common in the small business sector and where the premises are rented, the lease will cover both the business and residential parts of the property. However, the statutory basis for repossession is quite different for commercial and residential premises, especially where the latter qualify as ‘assured shorthold tenancies’.

Recently a landlord was seeking to repossess, on the grounds of arrears of rent, premises it had let to a fishmonger. The premises consisted of the shop on the ground floor, which together with a basement made up the commercial premises, and a first-floor flat in which the fishmonger lived.

The District Judge considered the tenancy to be a business tenancy, and therefore not protected by the provisions which apply to shorthold tenants under the Housing Act. A possession order in favour of the landlord was therefore granted. On appeal, the judge ruled that the initial decision had been wrong in regarding the lease as commercial when a residential tenancy had been created and set aside the possession order. The landlord appealed to the Court of Appeal.

The Landlord and Tenant Act 1954 (LTA) will apply when the premises are occupied for business purposes, and a tenancy which is governed by the LTA cannot be an assured tenancy. The question therefore was whether the occupation of any part of the premises was for the purpose of a business carried on by the tenant. If so, the use of the residential part of the premises was incidental to the lease of the business premises and the tenancy could not be an assured shorthold tenancy.

The landlord won the appeal. The initial purpose of the fishmonger’s lease was to secure business premises, so the LTA applied.

Landlords who let mixed accommodation should be prepared for prospective tenants to demand separate leases for the commercial and residential parts of the premises.

In 2017, changes were made to planning regulations surrounding mixed-use hereditaments allowing some changes of use to no longer require formal planning approval.


VAT on Electronic Services

If you supply electronic products (telecommunications, broadcasting and e-services) to non-business customers through online sale youwill need to  will comply with the VAT 'place of supply' rules that came into force on 1 January 2015. The rules apply to sales within the EU, where different rates of output VAT apply.

In simple terms, such sales will now carry VAT at the rate applicable to the country in which the customer is located. So, the sale of a web-based product to a customer in France will carry VAT at 19.6 per cent and that VAT will need to be remitted to the French tax authorities.

For VAT purposes, a customer 'belongs' in the country in which they have a permanent address or usually live.

HM Revenue and Customs has created a 'Mini One-Stop Shop' (MOSS) service, to assist UK businesses by collecting the VAT they charge on sales in all EU jurisdictions and remitting it for the taxpayer to the appropriate national tax authorities.

Businesses that make intra-EU B2C supplies of telecommunications, broadcasting and e-services which do not avail themselves of the MOSS facility are required to register and account for VAT in every member state in which they have customers.

Following Brexit, it is almost certain that VAT legislation will change significantly, although how such changes will manifest themselves is not yet known.


Entrepreneur's Relief - the Basics

From 6 April 2008 disposals of qualifying businesses and business assets have been eligible for Entrepreneurs’ Relief.

In simple terms, it allows business owners to reduce their Capital Gains Tax liability to the equivalent of 10 per cent of the chargeable gain.

The following notes will give you some idea of the conditions attached to Entrepreneurs’ Relief. The list is not exhaustive.

  1. Relief is only available to individuals;
  2. Disposal can include all or part of a business;
  3. Disposal must include the sale of shares in the owner’s company;
  4. The person making the disposal needs to own at least 5 per cent of the voting shares and be an officer or employee;
  5. The company must be a trading company; and
  6. All qualifying conditions must be met for at least 12 months.

Relief does not apply:

  • to the sale of assets without the sale of the business; or
  • on the cessation of trade.

The relief will be available to set off against any number of qualifying gains up to a lifetime limit, which is currently £10 million.

HMRC Guidance


In 2018 it was suggested that the operation of Entrepreneur'sRrelief should be reviewed as part of a review of capital taxes generally, so changes are to be ecpected.

The Duty to Manage Asbestos - HSE Guidance

According to statistics provided by the Health and Safety Executive (HSE), asbestos is the single greatest cause of work-related deaths in the UK. Every year 1,000 people who have been involved in carrying out building maintenance and repair work die as a result of past exposure to asbestos fibres and it is estimated that half a million commercial buildings still contain asbestos.

 Buildings all need repair and maintenance work from time to time and it is when asbestos fibres are disturbed, e.g. by drilling or cutting, that they are most likely to be inhaled as a deadly dust. The Control of Asbestos Regulations 2006 introduced a legal duty to manage asbestos. The duty applies to all non-domestic buildings and the common areas of residential rented buildings.

 If you are responsible for maintenance and repairs of premises covered by the Regulations, you have a duty to manage asbestos if:

  • you own the building;
  • you are responsible through a contract or tenancy agreement; or
  • there is no formal contract or agreement but you have control of the building.

The HSE publishes periodic guidance on managing absbestos risk.

In 2018, a High Court case established that the presence of plural plaques (a common precursor of asbestos-related diseases, but normally asymptomatic and not always followed by the development of mesothelioma or related diseases) could, if accompanied by symptoms related ot the plaques, be sufficient ground to bring a claim for compensation.





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