Commercial Client Reference Articles

The GDPR and Your Firm's Pension Scheme

The press is awash with comment about the General Data Protection Regulation (GDPR), which will be fully enforced from 25 May 2018. It would be difficult for any organisation not to be aware by now of the issues and, hopefully, your business is well on the way to making sure it complies.

However, many businesses do not seem to be aware that a firm's pension scheme must also comply with the GDPR, and the trustees of the pension scheme will be responsible for this.

Pension schemes hold a great deal of information about individual members and former members, which is protected data under the GDPR.

In order to comply, the scheme trustees will need to understand what personal data they hold and ensure the data is:

  • processed fairly and lawfully;
  • kept secure and up to date and is accurate;
  • only collected for legitimate purposes which are clearly specified; and
  • retained no longer than it is needed.

They must also demonstrate that the pension scheme has the systems and procedures in place to be able to prove compliance with the scheme's data protection policies and the GDPR.

For advice on any data protection issue or on your legal obligations regarding your firm's pension scheme or as a pension scheme trustee, contact us.

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.

Dealing With Subject Access Requests

Many businesses regard the Data Protection Act 1998 as something that merely requires a lot of form filling and the payment of fees, but there is a lot more to it than that.

The purpose of the Act is to protect a person's right to privacy with regard to the processing of their personal information. Individuals (‘data subjects’ in the terminology) have the right of access to information held about them. For example, a customer of your business has the right to contact you to request a copy of any data you hold on them so that they can check it. This is called a 'subject access request' (SAR). You are required by law to supply the information requested (once you have checked that they are who they say they are, of course). The individual making the request has the right to see data held in any form, not just that held on computer, so storing information in paper form does not avoid the responsibility.

Guidance on dealing with SARs is available from the Information Commissioner's website.

If you receive a SAR, you are required to supply not only all the information you hold on the data subject but also a description of why the information is processed, details of anyone it may be passed to or seen by, and the logic involved in any automated decisions. If you unjustifiably fail to comply with a SAR, the courts may impose a fine of up to £5,000. Any person who believes they have suffered damage and/or distress as a result of a contravention of the Act may seek compensation by applying to the High Court.

In the case of a failure to comply with a subject access request the Court may award compensation for distress alone.

The interpretation of the Court of Appeal is that ‘personal data’ has been defined in such a way that employees are only entitled to see information which is biographical ‘in a significant sense’ and which has the data subject as its focus. The mere mention of a person’s name does not entitle them to see the documents concerned.

In 2015, legislation  was brought in which makes requiring a prospective employee make their own request for a Criminal Record Check unlawful. 

SARs are goverened by the General Data Protection Regulation. There is guidance on this from the ICO.

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.





Termination of Leases - Tips for Tenants

 Disputes over break clauses in commercial leases are a continuing source of work for the courts. For tenants seeking to break their leases, here are some pointers:

  • Make sure any notice to break the lease is issued by the right person. This may strike you as obvious, but if, for example, your lease is held by your company, the notice will not be valid unless it is issued specifically on behalf of the company. There can be particular issues when the lease has been assigned;

  • Issue the notice at the correct time. This will be set out in the lease, but the language of the lease may not make it obvious. A notice period date which runs ‘from’ a stated day excludes that day, whereas one that commences ‘on’ a stated day includes that day;

  • Give the notice in the correct form. Usually, a notice must be given in writing and must be delivered in a particular form. For example, if the lease specifies that it must be delivered by post, a fax will not suffice;

  • Give the notice to the correct person and in the form set out in the lease and at the correct time. A notice delivered to the wrong person, in the worng form or late will not be valid;

  • Ensure you have not breached your lease terms. A notice to break the lease can usually only be given if the tenant has not breached its terms. Make sure that your rent is paid and all other covenants are complied with, otherwise the notice may not be valid; and

  • Make sure you have evidence of the state of the premises so that, if a dispute arises over the sum payable for dilapidations, you have the information necessary to support your position. It is normally advisable to agree the position as far as possible with the landlord. Remember that it may be cheaper to get some of the work that is necessary done yourself, rather than by the landlord, where possible.

Lastly, do make sure you comply strictly with the lease terms about vacating the premises. Recently, a tenant who remained in occupation only to fulfil its repairing covenants was deemed to have failed to give the landlord vacant possession. This was despite the fact that the tenant was only in occupation for a short time and had informed the landlord of its intentions. Receiving no response, it assumed that the landlord was in agreement.


Tips for Business Borrowers

With the economy improving, businesses will be thinking about financing the expected expansion of trade. Borrowing cost often dominates the thinking, but it isn’t all about the cost of the loan. In order to negotiate the right deal, here are some tips on other things to think about:

Borrowing Generally

•Make sure your lending proposition stands up on a cash flow as well as a profitability basis, and be able to defend your sales forecasts;
•Overdraft or loan? With an overdraft, you pay interest only on the amount you borrow plus an annual renewal fee – if the bank agrees to renew your overdraft. With a loan, you pay interest on the whole sum from day one, but normally at a lower rate, and the loan cannot normally be recalled. Many loans have, in effect, penalties built in for early repayment. It is common advice for ‘hard core’ borrowing and borrowing to finance assets to be by way of a loan and for overdrafts to be used for short-term borrowing;
•Don’t forget to read the small print. It may one day be important to understand fully the legalities. Don’t just sign the loan agreement and hope for the best – take advice first;
•If you are borrowing to finance increased sales, factoring or invoice discounting may be for you. These agreements are complicated and often impose significant extra accounting costs, but can be a good way of reducing risk;
•If you are self-employed, the lender’s ‘long stop’ is you and your assets. Take advice on how to minimise your risk before you borrow;
•If you are worried about being able to stay within your overdraft limits, it is often worth borrowing on loan to make sure you do: penalty charges and interest rates on unagreed overdrafts can make them a very expensive way to borrow;
•You may be tempted to use your credit cards for finance. This can be very risky as if you incur interest charges on a credit card, these will be much higher than for normal commercial lending – and you won’t get tax relief on the borrowing;
•Never borrow from an individual (particularly friends or family) unless you have a proper legal agreement in place (or want to risk a falling-out); and
•Remember that the greater your exposure in respect of any loan, the less ‘spare credit’ you will be regarded as having for other borrowing.

Company Borrowing

If you are borrowing for a company, the following should also be considered:

•Whether you are prepared to give a debenture for the loan. A debenture will give the bank security over all the company’s assets. This improves the bank’s security but makes missing loan repayments dangerous, as the bank will have the right to appoint an administrator. Giving a debenture may reduce the cost of the borrowing, however;
•You may be asked to give a personal guarantee. Take advice before agreeing. Again, your assets are on the line; and
•If you borrow money personally and put it in your company, tax relief on the interest might not be available. This can make a cheap loan quite expensive after tax.

Borrowing sensibly isn’t just a matter of signing an agreement, taking the cash and making repayments. Negotiating loan finance successfully is easier if you are advised by experienced professionals who fully understand the legal implications of the documents you will be asked to sign.

Nore interest rates are expeected to rise in 2018, so borrowing that is marginal now may be too expensive later on.

GDPR General Principles

The General Data Protection Regulation (GDPR) applies detailed provisions to ensure that personal data – i.e. any data relating to an identifiable person – is properly processed and kept secure, and imposes a significant compliance regime on those who hold such data.

Key to the GDPR is the concept of 'data protection by design', so that data protection risks are considered at all steps of data handling and storage.

The GDPR builds on the existing data protection principles, as set out in the Data Protection Act 1998, but also makes significant changes, imposing stricter rules concerning the holding and management of data and also the use of personal data for commercial purposes. There are substantial rights given to individuals as to how information about them is collected and held.

The key principles are that the processing of personal data must be lawful, fair and transparent. This means that only the minimum necessary amount of personal data must be collected and only for specified, explicit and legitimate purposes. The data must be accurate and kept up to date, with access to it and use of it restricted to only those personnel who are necessary for the purpose, and it must be retained for no longer than is necessary and kept secure.

The most significant addition is the 'accountability principle', whereby data controllers must keep records to demonstrate how they comply with the data protection principles – for example by documenting the decisions taken about a processing activity.

The ICO's office has published a guide and checklist for complying with the GDPR. The requirements are substantial for organisations of all sizes and the potential fines for failure to adhere to data protection law are extremely severe.

Company Formation Checklist

You may have come across advertisements which make forming a company sound very easy, but before you go ahead there are some serious issues to think through. If you have decided that a company is the best vehicle for your new venture then here is a checklist:

Decide what to include in the Articles of Association and Memorandum of Incorporation. These documents lay down how the company is to be structured and what its operating procedures will be. Include the names of the director(s) and company secretary (if necessary). Include any positions that have special names or rights (e.g. managing director) and any specific limitations on directors;

Determine who will own the shares and in what proportions. Changing this later on is fraught with potential tax traps;

Check that any proposed name for the company is allowable;

If you own trademarks you need to decide whether to keep them or sell or lease them to the company;

If the company will use a property owned by a director you need to decide whether or not you should have a lease. There are many tax considerations attaching to this, so take advice before you act;

Cars can be a major source of friction is small businesses. Take advice on whether cars should be owned by the company or kept out, how they are financed, insured and how you are going to meet travelling expenses;

Give thought to what the ‘corporate look’ is going to be. If you plan to use a trade name, do a search to make sure the company name AND trade name can be used without legal ramifications. Companies House produce a free guidance on many company issues including basic guidance on the Companies Act 2006;

Your stationery, website and emails must show your registered number and other details. Adding your VAT number is usually a good idea (particularly if stationery will be used for invoices) so you will need to sort out these details before you can get your stationery printed. There is helpful information in the guidance issued by Companies House on company formation;

If your turnover is more than the VAT limit you must register for VAT. You must also tell HM Revenue and Customs (HMRC) that the company is trading. Failure to do so within the time limit may lead to a fine. Even if you do not need an audit, you will probably have to appoint accountants to make sure your accounts comply with the Companies Act ;

By law employers must have employers’ liability insurance. However, very small companies which employ only their majority shareholder are exempt from the requirement to carry employers’ liability compulsory insurance. This has brought them into line with sole traders who do not employ anyone else;

HMRC can provide the employer's PAYE pack. The introduction to PAYE is here.

Employers are required to provide a (contributory) pension scheme for all employerrs who earn more than £10,000 per year who do not opt out.

Normally, you will not be able to open a corporate bank account until your bank has seen the company’s certificate of incorporation. If you need borrowing, consider what security can be offered and who will give guarantees if necessary;

Employees have numerous rights and it is important to know which laws apply to you and to be ready for forthcoming legislation. For example, all employees are entitled to a written statement of their terms of employment.

Insolvency and Pre-Packs

Legislation on insolvency enacted in the Small Business, Enterprise and Employment Act 2015  affect directors of companies that become insolvent.

The Act added two new grounds for disqualifying a person from being a director of a UK company and broaden the range of review of the past conduct of a director and the 'harm done' as a result of an insolvency. In 2016 Parliament issued a research briefing on the operation of pre-packs and setting out the need to comply with best practice when undertaking pre-pack sales out of administration.

What will be particularly worrisome for directors, and which should be of particular concern to those – including non-executive directors – who do not take an active and inquiring role in the management of the company, is that the Secretary of State has enhanced powers to make directors personally responsible for losses suffered by creditors in appropriate circumstances.

The Government has also made it known that it will consider implementing further changes that will affect 'pre-pack' sales of insolvent companies if voluntary measures currently in place do not prove to be successful in curbing abuses.

What follows below is a snapshot of some of the more important ones.

  • A new regime for the conduct of creditors' meetings is to be introduced, the practical effect of which will be that the proposals of the insolvency practitioner as regards the insolvent entity will be deemed to be accepted unless ten per cent of the creditors (by value) object. A formal meeting will not be held unless requested by at least ten per cent (by value or number) of the creditors.

  • Administrators will be given the same powers as liquidators of companies to bring claims for wrongful or fraudulent trading.

  • Directors of insolvent companies are at increased risk of having compensation orders made against them and face an extension to the period – from two years to three – within which an application to disqualify them from acting as directors can be brought. Compensation orders can also be brought against non-directors who advise a director who becomes disqualified.


Insolvency practitioners who overstep the mark when arranging pre-packs (typically transferring assets for less than a value the creditors think is fair) can face sanctions from the courts, which seem to be taking an increasingly dim view of perceived sharp practcie.

Bank Deposit Protection Rules for Businesses : Guide

The levels of protection available for different investments underwritten by the Financial Services Compensation Scheme (FSCS) are detailed on their website.

The FSCS protects the deposits of small companies, which are those which meet two of three criteria:

  • they have fewer than 50 employees;
  • their turnover is not more than £6.5 million per year; and
  • the balance sheet total is less than £3.26 million.

Protection is limited to £85,000 per institution per investor. Protection is also available for unincorporated organisations, partnerships and sole traders, but in the latter case the limit would apply in total to all (i.e. business and personal) accounts held by the customer with the same lender.

One possible area for concern is whether deposits held in different members of the same banking group are covered separately. In this case, if each of the banks is separately authorised by the Financial Conduct Authority, the FSCS would pay compensation up to the limit of £85,000 per person per authorised institution. If each of the banks is not separately authorised but is covered by the parent company's authorisation, the FSCS would pay compensation up to the limit of £85,000 once, irrespective of how many different group members a person held accounts with.

There is temporary cover of up to £1million for temporary high balances (e.g proceeds of a house sale) with a bank, building society or credit union that fails.

If the customer has deposits at and loans from the same bank. These are now  'netted off' for the purposes of compensation, which will improve the position for some customers. However, since companies and their directors are separate people in law, netting off would not occur in these circumstances.

Deposit takers in the Channel Islands and Isle of Man are not covered by the scheme.

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