Commercial Client Reference Articles

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 (which has now been updated with a broader and stricter Data Protection Act 2018), 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.

GDPR Guidance

If you have not yet taken steps to ensure your business complies with the General Data Protection Regulation (GDPR), the time to start is now: it came into force, on 25 May 2018, from which date the Information Commissioner's Office (ICO) will start to enforce the new data protection regime. Failing to adhere can bring swingeing fines.

The 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.

For advice on how the GDPR affects you, contact us.

GDPR Documenting Processing Activities

Article 30 of the EU General Data Protection Regulation (GDPR) contains explicit provisions that require organisations to maintain internal records of their data processing activities.

This obligation reflects the increased importance of accountability and the need to ensure (and demonstrate) that your organisation processes personal data in line with the GDPR. 

Most organisations must document their processing activities to some extent. Both data controllers and data processors have their own documentation obligations, but controllers are required to keep more extensive records than processors.

The scope of the exemption from documentation is still under consideration. Under the current guidance, organisations with 250 or more employees will be required to document all their processing activities. Smaller organisations must do so where the processing is not occasional, where it is likely to result in a risk to the rights and freedoms of data subjects or where it includes special categories of data. The latter largely refers to what is currently termed 'sensitive personal data' under the Data Protection Act 1998, but also includes genetic and biometric data when this is processed in order to uniquely identify an individual. Similar extra safeguards apply to the processing of personal data relating to criminal convictions.

The Information Commissioner's Office (ICO) has published detailed guidance on documentation. This explains how maintaining up-to-date records of data processing activities can assist in complying with other elements of the GDPR, such as drafting privacy notices, responding to access requests and ensuring the personal data you hold is relevant, accurate and secure. Knowing precisely what data you hold will also support good practice in data governance and increase business efficiency.

The ICO's guidance on documentation can be found on the ICO website.

The GDPR came into effect on 25 May 2018 as did the Data Protection Act 2018. This widens the scope of data protection law somewhat and increases various penalties for transgressions for various offences.

The GDPR and Your Firm's Pension Scheme


The press is awash with comment about the General Data Protection Regulation (GDPR), which came into full effect 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.

Direct Marketing Via E-mail - Regulations

UK law relating to the sending of unsolicited direct marketing material by electronic means are based on the EC Directive on Privacy and Electronic Communications and are modified by the General Data Protection Regulation which started to be enforced in the UK in May 2018.

A major aim of the Directive was to cut down on the amount of ‘spam’ that e-mail users receive from companies with whom they have never had dealings. The Department of Trade and Industry defines spam as ‘unsolicited commercial bulk e-mail sent without the consent of the addressee and without any attempt at targeting recipients who are likely to be interested in its contents’.

Whilst the intention behind the law is clear, the regulations only apply to UK businesses and will do nothing to prevent spam originating in countries where the relevant laws are less strict or, indeed, non-existent. For genuine UK businesses seeking to increase sales of their products to a targeted market, the effect will be more red tape in order to ensure they do not fall foul of the regulations.

The regulations apply to unsolicited commercial e-mails and text messages (SMS) sent to individual subscribers, rather than to company addresses, so much business-to-business e-marketing is not affected. However, under the regulations the term ‘individual subscriber’ includes sole traders, non-limited liability partnerships and their employees.

All direct marketing e-mails, regardless of whom they are sent to, must include clear sender and contact details. In addition:

  • businesses must gain prior consent in that an individual must have actively opted in before they are sent unsolicited marketing e-mail;
  • if your website uses cookies, or other tracking devices, to recognise previous visitors or to capture information about a user’s preferences, you must tell them this and inform them as to how any collected information will be used. Consumers must be given the right to refuse cookies;
  • individuals are given greater rights to decide whether they wish to be listed in subscriber directories. Directory providers will have to give them full information and a reinforced chance to be ex-directory.

If the recipient of the e-mail was a customer prior to 11 December 2003, you may continue to market to them providing:

  • their e-mail or SMS details were obtained through the sale, or negotiations for the sale, of a product or service;
  • the product or service you are marketing is a similar one;
  • the individual had the opportunity to opt out of receiving direct marketing material at the time they gave their contact details and is given the chance to unsubscribe or opt out on each new message that is sent; and
  • the identity of the sender is not concealed.

However, where a customer has previously registered an interest in a company’s products or services, but has neither bought anything nor entered into negotiations to purchase which then fell through, then that individual’s consent must be sought before you can contact them again for direct marketing purposes.

The Office of the Information Commissioner is responsible for enforcing the regulations by issuing enforcement orders to those who do not comply. Breach of an enforcement order is a criminal offence liable to a fine of up to £5,000 in a Magistrate’s Court or an unlimited fine if the trial is before a jury. Any individual who has suffered damages as a result of a breach of the regulations has the right to sue the person responsible for compensation.

View regulations.

The GDPR requires that consent to be sent marketing email must be unambiguouis and freely given and that the recipient must be given adequate information on how their information will be used.

Dealing With Subject Access Requests

Many businesses regard the Data Protection Act 2018 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.

 

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

Drug Policy - Recognising the Signs and What to Do

Substance abuse amongst staff can affect all areas of employment, whether it be a decrease in productivity, increased absenteeism or the increased likelihood of accidents and injuries. The failure to identify and deal with a problem is an unnecessary risk for businesses and can prove costly.

The Law

The Misuse of Drugs Act 1971 makes it an offence for any person to permit the production, supply or use of controlled drugs or substances on their premises, unless they have been prescribed by a doctor.

Employers also have a general duty under health and safety legislation to ensure, as far as is reasonably practicable, the health and safety and welfare at work of their employees and to make sure that no one else is put at risk as a result of the work activities of an employee.

Under the Management of Health and Safety at Work Regulations 1999 employers have a duty to assess the risks to the health and safety of their employees. If you knowingly allow an employee to carry on working whilst under the influence of drugs and this puts others at risk, you could be prosecuted.

Health and safety law applies to driving activities as it does to other work activities and the risks must be managed accordingly. Drivers must not be under the influence of drugs while driving, attempting to drive or when they are in charge of a vehicle. In addition, the Crime and Courts Act 2013 (Commencement No 1) (England and Wales) Order 2014, which came into force on 2 March 2015, makes it a criminal offence for a person to drive with a concentration of any specified controlled drug above the maximum specified limit for that particular drug.

What to Look Out For

Possible signs of drug misuse include:

  • impaired performance such as lack of concentration, a tendency to become confused and poor judgement;
  • sudden mood changes and unpredictable behaviour;
  • poor time-keeping;
  • unusual irritability and deteriorating relationships with others;
  • lower personal standards – self-neglect;
  • increased time off work;
  • dishonesty and theft.

There may, of course, be other reasons for such behaviour patterns but it is sensible to consider the possibility that misuse of drugs could be the cause.

What to Do

Even if you are confident that your business does not currently have a problem, drug misuse that affects the workplace is a growing threat. It is advisable to have an agreed, written policy setting out the company’s position.

Employees should be well informed as to the policy and know that it applies to everyone in the company. It should form part of your overall health and safety policy. Make sure you consult with employees and with safety representatives.

The policy should include a definition of drug misuse, have clearly stated aims, name the persons responsible for carrying out the policy and give clear guidelines as to what employees must do to comply with the rules.

If an employee suffers from drug addiction, you should support them, not punish them. Offer them counselling and encourage them to seek voluntary help. Addiction could be viewed as an illness in an unfair dismissal case so disciplinary procedures may not be appropriate. The policy should contain a statement assuring employees that problems will be dealt with in confidence, subject to the provisions of the law. It should, however, be made clear that a breach of the law (for example the possession of or dealing in substances that are controlled under the Misuse of Drugs Act in the workplace) will be reported to the police immediately. Make clear the circumstances in which disciplinary action will be taken.

It is important to train key staff to be aware of the signs of drug misuse and how to handle the situation sensitively.

Review your policy regularly and check that it is widely understood. If you have a staff handbook, it should contain details of the policy. Make awareness of the policy a part of the induction programme for new employees.

Where it is justified, some employers screen employees for illegal substances as part of their drug policy, particularly in safety critical industries. With the widespread advance in non-intrusive methods of testing, this is likely to become more common. However, this is a very sensitive area because of the legal issues involved and we would recommend you take advice to ensure there is no breach of your employees’ rights. Also, the results of any drug tests must be handled in accordance with the General Data Protection Regulation and the Data Protection Act 2018

Psychoactive Substances and Your Workplace Drug Policy

The Psychoactive Substances Act 2016 makes it an offence to produce, supply, offer to supply, import or export any psychoactive substance if it is likely to be consumed for its mind-altering properties. There is a list of exemptions, which includes legal substances that are in everyday use, such as nicotine, caffeine and alcohol, and medicines, which are regulated elsewhere.

The substances targeted by the Act usually contain one or more chemical substances which, when consumed, imitate the effects of illegal drugs controlled by the Misuse of Drugs Act. Prior to the ban, these substances were frequently referred to as 'legal highs'. They often contain ingredients that have not been tested on humans and so their effects are hard to predict. As such substances are not generally intended for human consumption, they have frequently been marketed as bath salts, incense or plant food. The drugs have three main effects – as stimulants, sedatives or hallucinogens.

Possession of a psychoactive substance is not in itself an offence, except where it occurs within a 'custodial institution' – i.e. a prison, young offender institution, remand or removal centre etc.

The Advisory, Conciliation and Arbitration Service (Acas) advises employers who do not already do so to include the use of psychoactive substances in their workplace drug and alcohol policies. As screening for their use can be difficult, Acas suggests focusing on the effects of such mind-altering substances on employees' behaviour and ability to work, rather than on the drugs themselves.

Dealing with Employee Absence

Employee absences can be both costly and disruptive for businesses. It is therefore advisable to identify the reason why people are off work and to manage their absence in a sensitive way. If their working conditions have contributed to their illness, remedial action should be taken where possible.

The Chartered, Institute of Personnel Development (CIPD) has published its eighteenth annual survey, 'The Health and Well-Being at Work Report', which was carried out in in November 2017 in partnership with Simplyhealth. Whilst the survey continues to monitor absence management trends, policy and practice, as in past years, this year the focus has shifted from absence management to health and well-being at work.

The 2017 survey found that organisations that have in place a standalone well-being strategy, with senior managers and line managers who recognise the importance of and promote the well-being of workers, are more likely to report positive outcomes with regard to employee sickness absence.

The average level of employee absence has increased slightly to 6.6 days per employee, compared with 6.3 days in the 2016 survey. Once again, the survey found that average levels of absence remain higher in the public sector (8.5 days per employee) and in larger organisations.

The most common cause of short-term absence for the vast majority of organisations is minor illness, while mental ill health, musculoskeletal injuries (including back pain), stress and acute medical conditions are the most common causes of long-term absence, as in previous years. However, more organisations include mental ill health among their most common causes of short- and long-term absence and more respondents this year report an increase in common mental health conditions, such as anxiety and depression. One in five of those who responded report that mental ill health is the number one cause of long-term absence in their organisation, while nearly three-fifths report that it is among their top three causes of long-term absence.

Another finding is that the vast majority of respondents (86 per cent) report that they have observed 'presenteeism' (i.e. people continuing to work when they are unwell) over the past 12 months, with over a quarter of these reporting that presenteeism has increased over this period.

Nearly two-fifths (37 per cent) of respondents report that stress-related absence has increased over the past year and just 8 per cent report that it has decreased. Workload remains by far the most common cause of stress at work, with just over two-thirds of organisations claiming to be taking steps to identify and reduce workplace stress – a small increase on previous years.

While only a minority of organisations (6 per cent) have a standalone mental health policy, there have been small increases this year in the proportion reporting that mental health is part of another policy or that they are developing a policy, and most organisations are taking some action to manage employee mental health at work.

What Can Employers Do to Promote Employees' Health and Wellbeing?

Clearly, awareness of mental health issues and supporting workers who are experiencing problems is vital to promoting employees' health and wellbeing. Having policies in place that acknowledge these issues that are well understood can help in this regard. Creating a friendly working environment, where staff feel valued as part of a team and where flexible, ‘family friendly’ policies are in force is likely to pay dividends, keeping absenteeism to a minimum.

If you do not have a well-being strategy, we can assist you in designing one that focuses on the demands of your workplace. Employers have a duty to protect workers from stress by carrying out appropriate risk assessments and acting on them. These should focus on the areas of work that have the greatest impact on stress levels – i.e. demands, control, support, relationships, role and change.

Managing Sickness Absence

When staff are off sick, their absence should be managed effectively. Make sure they are well informed as to your sickness policy and procedures and that these are seen to be followed and accurate records are kept. These must be retained for at least three years after the appropriate financial year-end.

Where line managers are primarily responsible for overseeing employee absence, make sure they are trained in all aspects of absence-handling and have ongoing support, such as online support or a care conference with the Human Resources department, so that they are able to handle what can be difficult conversations with staff in a sensitive manner.

When hiring new staff, make sure you check their attendance record with the previous employer. If new staff are absent it is good practice to make sure you know if there are problems preventing them from settling in. How staff are treated in the first weeks of a new job is vital. Inadequate training can leave them feeling disillusioned.

It is sensible for employers to ensure that contracts of employment allow them the right to get an independent medical assessment in the event of an employee taking more than a few days off work. You may consider requiring all potential employees to undergo a medical examination with an occupational health adviser.

As a matter of company policy always carry out a ‘return to work’ interview. This may range from ‘hope you’re better, we missed your contribution’, to an identification of underlying problems that will affect your management strategy. It may also deter malingerers.

Long-term sickness must be handled sensitively. You must have an employee’s permission to apply for a medical report. It is vital to keep in touch so that the employee doesn’t feel isolated. Consider referring them to an occupational health specialist. This can identify ways of helping them return to work and give you information as to how long the absence is likely to last.

Disciplinary action for unacceptable absence must be distinguished from dismissal on health grounds. Employers need to be aware of the full range of conditions that count as a disability for the purposes of the Equality Act 2010, which include mental health problems that have a substantial, adverse and long term effect on a person's ability to carry out normal day-to-day activities, the effect is long-term and the condition is likely to recur. Where an employee is suffering from a condition covered by the Act, reasonable adjustments must be made to help them return to work.

Care must also be taken to avoid a claim for unfavourable treatment 'because of something arising in consequence' of an employee's disability.

As regards the accrual of holiday pay when a worker is on long-term sick leave, workers have the right to carry forward four weeks of their statutory holiday entitlement to the next leave year if they are unable to take it or choose not to do so in the current year owing to long-term illness. However, the leave, or the right to payment in lieu of that leave, will be lost if it is not taken within 18 months of the end of the relevant year in which the entitlement to that leave accrued.

Dealing with long-term absences, in particular, is a difficult area of the law. Each case must be decided on its own merits and proper procedures must be followed. Employers who have not done so for a while are advised to review stress management and long-term absence policies and procedures so that potential problems are identified early on and remedial action is taken as soon as possible.

Workplace Stress - An Employer's Duties

The Chartered, Institute of Personnel Development (CIPD) has published its eighteenth annual survey, 'The Health and Well-Being at Work Report', which was carried out in in November 2017 in partnership with Simplyhealth. Whilst the survey continues to monitor absence management trends, policy and practice, as in past years, this year the focus has shifted from absence management to health and well-being at work.

The 2017 survey found that organisations that have in place a standalone well-being strategy, with senior managers and line managers who recognise the importance of and promote the well-being of workers, are more likely to report positive outcomes with regard to employee health.

Stress-related absence increased over the last year in nearly two-fifths of organisations, while even more report a rise in reported common mental health conditions, such as anxiety and depression. More organisations reported that mental ill health was among their most common causes of short- and long-term absence. One in five of those who responded reported that mental ill health is the number one cause of long-term absence in their organisation, while nearly three-fifths reported that it is among their top three causes of long-term absence.

The main causes of stress at work have changed very little over the last few years, with workload remaining the main cause of stress-related absence, particularly in larger organisations. Management style was the second main cause of stress, compared with the third main cause in 2016. Non-work factors such as family and relationships also remain one of the major causes of stress. In larger organisations, however, considerable organisational change/restructuring was likely to rank among the top three causes of workplace stress.

The number of organisations that reported seeing an increase in stress-related absence and mental health problems indicates that these continue to give cause for concern.

Work-related stress occurs when a worker reacts in an adverse way to excessive pressures or demands in the workplace. It can affect a person's mental and physical health. A distinction can be made, however, between abnormal pressure that is beyond the worker's ability to cope as distinct from normal pressures of work that an employer is entitled to expect people to handle without adverse effects.

Dealing with stress is a difficult issue for employers. In addition to specific duties under health and safety legislation, such as carrying out risk assessments/stress audits, they owe their employees a common law duty to take reasonable care to safeguard their health and safety, and this includes a duty to control stress levels at work. Employers are only in breach of their duty if they have failed to take reasonable steps in the circumstances to prevent the stress. It is foreseeable injury arising from an employer's breach of duty that gives rise to a liability, and foreseeability depends on what the employer knows (or ought reasonably to know) about an individual employee. However, taking positive steps to safeguard the well-being of workers, such as ensuring that the working environment is free from the sort of pressures that can have an adverse effect, makes good business sense as doing so is likely to have a beneficial impact on the productivity and efficiency of a business.

Larger employers should make sure that managers are trained to recognise the signs of stress and know how to respond, and that they conduct themselves in a way that minimises stress and promotes a happy working environment. Employers should be aware that they can be found vicariously liable for the actions of their employees in certain circumstances.

An employer who is actively managing potential causes of work-related stress and preventing day-to-day pressures from becoming excessive is unlikely to be found in breach of their duty. The legal duty to carry out assessments so that risks posed by work-related stress can be managed means that it is important to examine your workplace to spot the signs of existing work-related stress and to identify any potential sources of stress that could put employees at risk. These assessments should be kept under regular review. Do you, for example, monitor employees' working hours to make sure they have appropriate rest breaks? Do sickness absence figures or staff turnover rates reveal a problem with high stress levels that should be tackled? Do you have policies in place to identify and deal with any instances of bullying and harassment?

Employers have a legal duty to consult with duly elected safety representatives of employees on health and safety matters, or with employees themselves where there are no formally elected representatives, and there is no exemption from this requirement for 'small' employers. However, you might also consider carrying out periodic employee satisfaction surveys seeking views on workplace morale and attitudes to stress, and asking for suggestions on ways of combating any problems.

If you become aware that an employee is suffering from work-related stress, you are required to take reasonable steps to prevent it. It is often helpful to agree an action plan with the employee concerned. Case law suggests that an employer who offers a confidential advice service to employees suffering from stress, with referral to appropriate counselling or treatment services, is less likely to be found to have failed in their duty of care, provided reasonable steps are taken at the same time to alleviate the problem – for example by reducing that person's workload or making changes to the way they work.

Employers are reminded of their specific duty under the Equality Act 2010 to make reasonable adjustments to the work or workplace where an employee is disabled, the definition of which can include persons who are experiencing mental health problems caused by stress where their illness is having a substantial and adverse effect on their ability to carry out normal day-to-day activities, the effect is long-term and the condition is likely to recur.

The message to employers is clear: stress cannot be ignored. It is important to have in place a stress policy that is proactive in promoting the well-being of workers. If and when stress-related complaints are made, they must be treated seriously, investigated fully and appropriate action taken at once. Active intervention is required. Monitor the situation to see if the remedial action is working and continue to do so until the situation is resolved. Make any changes necessary to prevent a recurrence where possible.

Useful guidance on this topic, 'Work-Related Stress – What the Law Says', has been developed by the CIPD in conjunction with the Health and Safety Executive, the Advisory, Conciliation and Arbitration Service and Health, Work and Well-being.

Guide to IHT and Small Business

Inheritance Tax (IHT) is payable on a deceased person’s estate (exclusing their principal private residence for whaih an extra allowance is available) at 40 per cent above £325,000 (2017/18) – the current nil rate band. However, business property is treated differently from personal property and may qualify for  Business Relief, formerly called, and generally known as Business Property Relief (BPR). Businesses benefit from a more generous taxation system because of their role in providing economic growth.

BPR can provide 100 per cent relief from IHT on a sole trader’s business or partnership interests and can apply to shares in trading companies that are not quoted on a recognised stock exchange. Shares quoted on the Alternative Investment Market can also be eligible for 100 per cent BPR. There is no limit to the value of BPR which can be claimed. Business assets must have been owned by the donor for two years to qualify for BPR and the business in respect of which a claim is made must also be wholly or mainly a trading company. Investment companies and businesses dealing in shares, stocks, securities, lands or buildings do not qualify for BPR.

BPR at 50 per cent is available on land, machinery, plant and buildings used for business purposes, although they will need to have been owned and used mainly for business purposes within the past two years. It is also available for shares in quoted companies where the shareholder has a controlling interest of more than 50 per cent, although this is rare.

In the context of a family business, it may be preferable for a donor to leave IHT-exempt assets to a beneficiary other than their spouse or civil partner. There is no saving if business assets are passed to a beneficiary who would not be liable for IHT anyway. For example, a transfer of business assets qualifying for BPR to a spouse would achieve no IHT saving on that transfer, because transfers between spouses are normally exempt from IHT in any event. There are several issues to consider and expert advice is essential when undertaking IHT planning with regard to business assets.

No BPR is available where there is a binding contract for the sale of a business. This might occur where there are a small number of shareholders who have a shareholders’ agreement which requires that should one of them die, their executors will sell his or her holding to the remaining shareholders, who are required to buy it.

Even where shares would not qualify for BPR, the £3,000 annual tax-free allowance for IHT is available. A shareholder can use this to pass shares to anyone of their choosing. This can be used to give the beneficiary a gradually increasing interest in the company, reducing the IHT payable on the donor’s death. However, care should be taken because the values of ‘slices’ of the shareholdings can vary massively depending on what the voting rights involved are: never transfer shares without taking professional advice on the likely tax implications.

As an alternative approach, a person may choose to sell or wind up their business rather than leave it to beneficiaries in their will. They would then be able to leave liquid capital to their beneficiaries instead. This has the advantage that the value of the business would be precisely fixed and available in cash. However, cash does not qualify for BPR, so this approach has significant drawbacks.

The current law particularly benefits small businesses that are family owned trading companies. They will be likely to qualify for BPR and make the most of the possible IHT saving.

In 2018, the Government announced its intention to review and simplify capital taxation, so changes are to be expected,

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