Employer Protect – now including Pursuit Cover

We recently launched our Employer Protect Scheme, which is designed to help employers manage all of their Employment Law and HR requirements in an affordable and effective way. We can provide advice on the basis of fixed monthly fees to allow you to set your budget, or if you prefer we can continue to provide ad hoc advice as and when required. The most important element of the scheme is flexibility.

A particular benefit of our scheme is that we offer insurance protection against legal fees and awards/settlements in the event of a Tribunal claim against you.  This is an optional extra.  We are pleased to announce that we can also now offer Pursuit Cover as part of any policy.

Many of our clients have employees working for them who are subject to post-termination restrictions. The aim of these restrictions is to protect the business when an employee leaves, for example to prevent the solicitation of clients.  However, they are notoriously expensive to enforce, and this often deters clients from enforcing what is necessary to protect their business.  The benefit of the Pursuit Cover is that it covers High Court costs in respect of enforcement of restrictions.

The Pursuit Cover is of course not compulsory within the insurance policy, but we feel it may be of great benefit to some of our clients.

For more information take a look at our Employer Protect leaflet here

Growing bitcoin use fails to mask payment risks

Rarely out of the financial pages, virtual currency “bitcoin” is beginning to gain limited acceptance amongst traditional retailers, with some specialist food and drink outlets now able to accept digital money.

But the attractiveness of an untraceable payment method that is free from regulation or supervision, and knows no international or political borders remains, for many, exactly the reason to steer clear. 

Allegations of connections with criminal gangs have done little to boost bitcoin’s image, whilst storing a virtual wallet on a computer hard drive magnifies the risks from a failed or lost laptop for even the most law abiding consumer. Such are the growing pains for a new payment method.

Risks aside, few can doubt the rise in bitcoin’s popularity, and any retailer that fancies dipping a digital toe in the world of peer to peer payments needs to consider whether it is a good fit for its business.

Currency volatility is well known to those that trade internationally, but the frequency of wild gyrations in bitcoin values are rarely seen in the mature foreign exchange markets.  With hedging virtually non-existent, holding bitcoins without offsetting liabilities exposes you to a huge risk.

Although the US is making some progress, there is currently little in the way of a distinct regulatory framework in the UK.  The traditional payments system relies on confidence, underlined by law, to function effectively and huge problems could result without these.

For the time being Tolhurst Fisher will not be accepting bitcoin payments, but if your business requires advice on collecting or making payments please contact our commercial department by emailing commercial@tolhurstfisher.com for further information.

Growing Your Business

The UK economy grew by 1.9% in 2013 according to the Office for National Statistics.  Chancellor George Osborne recently commented that “the economic recovery is broadly based with manufacturing growing more than other sectors”.

Looking specifically at the manufacturing industry, there are many exciting way to grow and expand your business.  Some of these ideas may include:-

Distribution Agreements

This is a fairly low risk means of expanding a business into new markets or territories.   Generally, the manufacturer sells products to the distributor, who then sells the products on to customers, adding a margin to cover costs and profit.  In purchasing and reselling the products, the distributor contracts both with the supplier and with the customer, and title to the products in question will pass to and from him.

Agency Agreements

An agent would be an intermediary involved in making a contract between the manufacturer and the manufacturer’s customer.  Therefore, the contract for sale of the products is made between the manufacturer and the customer. The agent generally has no contractual liability to the customer. 

It is essential to use clear terms when defining whether the relationship between manufacturer and intermediary is one of agency or distributorship. Lack of clarity may lead to unnecessary litigation. Tolhurst Fisher can assist you in drawing up agreements that would be appropriate for your planned business expansion and would also be happy to review any existing agreements.

Please contact our commercial department by emailing commercial@tolhurstfisher.com for further information.

Leading the way in alternative funding

Although historically low interest rates would ordinarily encourage leveraged business expansion, the message we most frequently hear from the corporate community is that access to traditional lending remains, at best, restricted.  In some cases the amount of funding on offer falls so far short of business requirements that expansion plans have to remain on hold and opportunities are missed.

This environment has seen a surge of alternative funding vehicles.  Grabbing the financial headlines is “crowdfunding”, a collective term where a project is funded by numerous investors offering a relatively small amount.  Still in its infancy, this type of finance is believed to be worth over £350mn already, and is now being watched by the Financial Conduct Authority.

Fuelling the rise of alternative funding schemes is widespread investor frustration with historically low interest rates.  With few signs that any monetary tightening is imminent, the prospect of accessing corporate debt markets is clearly attractive to the right investor with the right risk profile.

Tolhurst Fisher LLP has been involved with a number of recent transactions where private individuals have funded corporate projects, either entirely, or to bridge a gap in existing funding lines.  Whether we are acting for the borrower or lender, we can advise on the most appropriate security structure and lending documentation, often smoothing over complexities and in short timeframes.

If you are in the process of investing in a business, or if you are receiving external investment, call Tolhurst Fisher’s corporate finance specialist Edward Garston on 01245 216100 to discuss turning your proposal into reality.

LLP Tax Changes - Review Your Partnership Agreement Now

The tax assessment of LLP’s and mixed member partnerships will almost certainly change on 6th April 2014.  Technical consultation on the Finance Bill 2014 has now closed and HMRC should publish its revised guidance imminently.  However the draft legislation is expected to go ahead in substantially its current form. 

The cumulative effect of these changes will mean that some partners could face a large increase in their tax bill.  As a result many firms will look to mitigate the impact of these changes by reviewing their partnership structure.  

Two strands of change to partnership taxation

The main objective of the reforms is the removal of perceived structural inconsistencies in the tax system.  This will be achieved by making changes to two distinct aspects of current partnership tax rules:- 

• Removing the presumption of self-employment for salaried members of an LLP in order totackle what HMRC views as “disguised employment”; and
• Introducing new rules to apply to mixed membership partnerships (not just LLP’s).

Disguised Employment

Currently, individual members of an LLP are always taxed on a self-employed basis irrespective of the terms.  

Under the proposed changes, LLP members will have to satisfy at least one of the three following conditions to prove they are true partners in the business:-

• A variable profit share based on the overall profits of the firm;
•   Significant influence over the affairs of the firm; or
•  A contribution of at least 25% of their fixed pay is made to the firm’s capital.

There remains some uncertainty about how exactly these conditions will be applied but the basic principles will probably remain.  There is also some doubt about the timing of the implementation of the changes, particularly given that so many LLPs still follow the traditional partnership year end of 30^th April. 

Mixed membership partnerships and asset disposals

There are a number of structures used by partnerships that involve using corporate partners for various reasons.  

The Government now aims to prevent partnerships from using corporate partners to reduce the tax liabilities of individual members.  Partnerships may however still continue to use a corporate member for non-tax purposes. 

It is not intended for there to be any exemptions for particular partnerships, for example, family partnerships.

What to do next?

It is important to review your existing partnership structure with a view to making any necessary changes in order to keep your structure in line with these changes and therefore, mitigate any unnecessary additional tax liabilities taking effect from 6^th April 2014.

Tolhurst Fisher acts for a number of professional partnerships and can assist you in reviewing and your existing agreements and amending as necessary.  Please contact our commercial department by emailing commercial@tolhurstfisher.com for further information.

Extreme Weather

If your activities are susceptible to extremes of weather then you will be aware of the significant commercial problems that can arise.

With parts of the South West effectively cut off due to flooding this winter, suppliers have either been unable to make deliveries to the region, or those that have got through have been significantly delayed.  Clearly this raises questions about contractual performance and any possible remedies for breach of contract.

The first port of call must be the supply contract.  If it states that “time is of the essence” for delivery dates, then the supplier could be liable if the delivery is delayed.

But what if the weather is so severe that you cannot even despatch products from the factory gate?  Power and communication networks can fail, and your employees may not be able to travel to their usual place of work.  In such circumstances you may be able to rely on a “Force Majeure” clause in your contract.

These provisions suspend a contracting party’s obligations and provide that the non-performing party is not liable for as long as the force majeure event continues.  In commercial situations they can provide welcome relief and allow that party to focus on how best to resolve the situation.

So if you are vulnerable to external events that could cause supply chain problems it is essential that your contracts contain appropriate protection to prevent a bad situation becoming a lot worse.  Please contact our commercial department by emailing commercial@tolhurstfisher.com for further information.