Frequent visitors to the UK need to keep track of the number of days that they are present in the UK, as they could become a UK resident under the statutory residence test and so liable to UK taxation.

Days where you are ‘in transit’ through the UK to another country are not added to your day count under the statutory residence test. A ‘transit’ day is one where you arrive in the UK as a passenger, in the process of travelling to another country, and leave the UK the next day. Provided you do not engage in any activities that are substantially unrelated to your travel through the UK, these days will be regarded as transit days.

HMRC make clear that eating dinner or breakfast in a hotel room would be an activity which would relate to your transit through the UK. In contrast, watching a film at a local cinema or catching up with friends would be regarded by HMRC as being substantially unrelated to your travel through the UK.

HMRC have recently updated their guidance with a further example to show how using social media for work related purposes can lead to a transit day counting as a day of residence in the UK for the purpose of statutory residence test.

HMRC give the example of Simon, a lawyer who lives in France but works internationally. He flies to Canada on a business trip via the UK. He flies into Gatwick Airport on Tuesday evening and flies from Heathrow to Canada at 2 o’clock on Wednesday afternoon.

Simon coincidentally spots a colleague from his London office while he is waiting for his bus to Heathrow. They catch up over coffee talking about their families and recent holidays. In the evening Simon uses social media to look at his colleague’s holiday photos and then exchanges a few emails with him about them. As the meeting was entirely by chance and did not involve any work related issues, the day Simon arrived is treated as a transit day and will not count as a day he was present in the UK.

In contrast, if Simon had discussed work with his colleague from the London office and subsequently used social media to update his boss on the discussion with his colleague, then these acts would be regarded as being unrelated to Simon’s transit through the UK. Therefore, the first day he arrived in the UK would be counted as a day where he was present in the UK for the purposes of the statutory residence test.

Anyone travelling through the UK should therefore take note of the guidelines provided by the HMRC, in order to ensure that they do not accidentally engage in any activities regarded as substantially unrelated to their travel through the UK. This could result in these days being subject to UK income tax and capital gains tax.

For more information please contact James Frampton, Associate in our Tax, Trusts and Succession team on james.frampton@michelmores.com or 01392 687505

The Michelmores and Western Morning News Property Awards are the region’s premier property competition, showcasing the very best in West Country property projects, buildings and firms.

The Commercial Project of the Year with a Value Under £5million category  is sponsored by Torbay Development Agency and Eagle House, Exeter was announced as the winner at a Gala Dinner at St Mellion International Resort on May 8th 2014.

More about what the judges had to say…

Shortlist 2014

Eagle House, Exeter Science Park

Nominated by Eagle One Limited/LHC Architecture + Urbanism

Project Value: £2m

Eagle House is the first of seven buildings expected to form the Phase 1 ‘cluster’ of the much anticipated Exeter Science Park.  It is the new headquarters of developers Eagle One/Blue Cedar Homes and was commissioned to fulfil the group’s corporate expansion plans with a speculative element being ‘pre-let’ prior to the building’s completion.

The building is “business-like and contemporary” but its impact is “bigger than its scale”.  For the success of the wider Science Park scheme, there was a need for a ‘flagship’ development that supports this emerging ‘science-based’ community, encouraging new start-ups, nurturing local skills and encouraging further relocation of organisation such as the Met Office.

Eagle House is a ‘gateway’ building representing the start of the Science Park and acting as a catalyst for the scheme as it gains momentum.

The building aims to provide, at a viable cost, high-quality, sustainable and flexible commercial offices. The prominent site selection and contemporary design sets the standards to which the rest of the Science Park will aspire and by meeting the requirements of BREEAM ‘Excellent’ and best practice from the British Council of Offices, it sets the tone of innovation and confidence that underlines the Park’s aims.

It provides a low-demand and carbon-saving environment without impacting on the building-users’ ability to control and tailor their own environments and it exploits the sloping site and views across the Clyst Valley and Exe Estuary dealing sensitively with the impact on the landscape.

Haven Banks Outdoor Education Centre, Exeter

Nominated by Midas Construction Ltd/NPS South West Ltd

Project Value: £4.5m

Opened by HRH The Earl of Wessex in July 2013, the Haven Banks Outdoor Education Centre on Exeter’s quayside provides a world-class facility for over 25,000 young people and adults in the region to use every year for outdoor adventure activities.

This outstanding facility was funded by Devon County Council using proceeds from the sale of Exeter Airport but is being run by Exeter College as part of a pioneering partnership arrangement.

The centre is set to increase take-up of outdoor adventure activities in the region creating a contemporary hub for young people and adults from Devon and across the South West, as well as spearheading a major rejuvenation of Exeter’s historic canal side quarter.

The feel of traditional warehouse architecture has been preserved amidst a potpourri of interesting shapes and forms dominated by the 23-metre high steel climbing tower complete with spiral staircase.  There is also an indoor rock form caving system, 7-metre high rock faced climbing walls, a 45-metre long pontoon fronting the canal, changing facilities for 120 students, 5 training rooms and a wet meeting room.

Granite paved open space and an upgraded canal side footpath provide public access and there is cleverly designed facilities access including access to boats.  In addition to caving, climbing and powerfan “free fall” descent, other activities include sailing, kayaking and canoeing, windsurfing, raft building, bell-boating, orienteering, archery and team building.

The judges felt that this was an “optimistic building” which “motivates people to be more adventurous”. The result is a highly innovative approach to creating an education and training facility, designed to encompass the diverse needs of a wide range of users from students to professionals.

Headland Hotel, Newquay

Nominated by Lilly Lewarne Practice Ltd

Project Value: £4m

Originally part of a wider development concept, which included a subterranean dining room and conference centre, new external swimming pool and tennis courts, the Headland Hotel’s new spa got underway in September 2011 after the necessary planning and Listed Building consents were obtained.

Two construction phases were programmed around the hotel’s peak Easter, summer and Christmas seasons – practical completion being achieved in December 2013 when Cornwall’s only ‘5 Bubble’ spa officially opened and was  brought into full use in January 2014.

The considerable investment in providing a luxury spa experience which includes a stunning reception area, consultation area, spa lounge, treatment rooms, heated pool, saunas, aromatherapy showers and a fully equipped state-of-the-art gymnasium, hides the huge challenge of creating a basement level facility, reinstating the landscaped embankment and utilising the volume beneath to create useable spa floor space and plant room.

The extension was then finished with a turfed roof melding with the natural landscape setting. As most of the accommodation is beneath the embankment with little opportunity for views out, the subterranean theme was emphasised in the ‘rockpool’ pebble wall finishes and contrast of naturally top-lit light wells to spa areas and more subdued lighting of the new indoor pool.

The judges recognized the considerable obstacles overcome by the architects and contractors on this project and acknowledged the wider contribution developments of this scale make to the tourism led economy as well as the business itself.  It is already attracting new markets and has created sustainable jobs.

PZ360, Penzance

Nominated by Mounts Bay Trading Ltd (MTBL)

Project Value:  £250,000

The PZ360 project started in July 2012 with the aim of refurbishing the ‘ugly’ and unloved Penlowarth building, a 1960’s reinforced concrete office block in the centre of Penzance which housed an Inland Revenue office until 2006.

The building was acquired by MBTL in 2012 with the aim of securing full building occupancy through active management and investment in the building fabric, its facilities and its tenants.

The six-storey building includes 17,000 sq ft of self-contained offices from 315 to 6,600 sq ft and is the largest private sector commercial building in Penzance. As the tallest building in the town, it commands a unique 360⁰ panoramic view over Mount’s Bay, which is now symbolized in the building’s new name.

In order to arrest declining occupancy and to attract new tenants, it was essential to improve the image of the building starting with a new contemporary front entrance, more vibrant interior with better business facilities and new branding.

PZ360 is now one of the best located and specified business space destinations in West Cornwall providing modern, flexible, technology enabled town centre accommodation at reasonable rents with a particular focus on providing space to micro-businesses and SMEs.

With the help of Community Interest Company, Workhubs Network, MBTL was successful in attracting a Regional Growth Fund grant to support the conversion of the fourth floor at PZ360 into The Workbox, a facility providing homeworkers and micro businesses a place to work from, network in, hold meetings and events and give presentations.

PZ360 is now home to several businesses, employing some 200 people on site and making a considerable contribution to the local economy in terms of job creation and consumer spend.  Tenants benefit from Superfast Broadband and the thriving, buzzing community of like-minded people the new workplace environment at PZ360 has created.

The Michelmores and Western Morning News Property Awards are the region’s premier property competition, showcasing the very best in West Country property projects, buildings and firms.

The Commercial Project of the Year with a Value Over £5million category is sponsored by Summerfield Developments and The Research, Innovation, Learning and Development Centre, Exeter was announced as the winner at a Gala Dinner at St Mellion International Resort on May 8th 2014.

More about what the judges had to say…

Shortlist 2014

The Research, Innovation, Learning and Development Centre (RILD), Exeter

Nominated by Interserve Construction Limited

Project Cost: £27.5m

The state-of-the-art Research, Innovation, Learning and Development Centre (RILD) is a partnership between the University of Exeter Medical School and the RD&E NHS Foundation Trust with the aim of streamlining the medical research process and enabling testing and analysis under one roof. It also provides a forum for students, researchers and clinicians to come together and ensure that medical research is relevant for the needs of the NHS.

The close links between the University and the Trust will mean that the single centre approach, from medical research through to training and development, will ensure that patients get the best service possible. Students and staff within both organisations can be updated on the current best medical practice. The training facilities for all staff have been expanded with improved facilities to allow continuing professional development throughout individuals’ careers.

As well as top quality research and post graduate education facilities, the building houses the National Institute for Health Research (NIHR) which will amass data from clinical trials of 10,000 subjects enabling researchers to analyse the information and to seek answers on some of the rarest healthcare issues facing society. Local, national and international communities and scientists will benefit from this building.

The judges felt that these new facilities represent a real asset for Exeter helping to attract high-end jobs as well as improve the standard of healthcare, research and discovery. The new building enables researchers to test patients, analyse samples, design and carry out case studies and communicate with clinical colleagues all under one roof, putting Exeter right at the heart of healthcare innovation world-wide.

The judges also commended RILD’s low carbon footprint, ‘brave design’ and its ‘dramatic’ interior design.

Sainsbury’s Penzance

Nominated by Stride Treglown Limited

Project Cost: £15m

The aim of the project was to redevelop the former Heliport brownfield site and improve the gateway to the town centre providing new employment opportunities to the local residents of Penzance.

The store currently employs 271 people with up to 200 staff on site each day benefiting local accommodation providers, restaurants and entertainment venues.  The customer footfall is 21,000 per week and the store is currently trading 20% over budget.

In addition to in-store retail, the Goods online facility enables customers with restricted mobility/ travel arrangements to get their groceries delivered in the local area. Sainsbury’s are anticipating the need to increase the number of vans to reach a wider audience by the summer 2014.

The judges were impressed by the elevated balcony of the customer cafe to the south east corner of the site with its large external seating area and stunning views towards Mounts Bay. The canopy and undulating roof are dramatic features that protect customers from the weather, provide an elegant and stylish look for the building and emphasise its intended role as a gateway landmark.

The palette of materials used on the building including local granite stone for the elevations of the building as well as Gabion retaining wall reflects buildings in the town centre. The sympathetic landscape scheme also used large granite rocks of the type found along the adjacent foreshore to Long Rock Beach.

The project which engaged with the community in a wide range of initiatives achieves its objectives and, in the judges view, has created “more than a typical supermarket”.

University Technical College (UCT), Plymouth

Nominated by BAM Construction Limited

Project Cost: £9m

UTCs are a new concept in education offering 14-19 year olds the opportunity to take full time, technically-oriented courses of study. They are equipped to the highest standard, sponsored by a university and offer clear progression routes into higher education or further learning in work.

This Plymouth City Council project is unique to our region and is aimed at providing an extra educational dimension for young people enabling the South West to grow its own skilled workforce within the next generation.

UTC combines national curriculum requirements with technical and vocational elements. Its curriculum is heavily influenced by local and national employers who also provide support and work experience for students particularly in the engineering and marine industry sectors.

30 to 40 local industries ranging from global corporations to family businesses are already embracing this new concept and offering the students first hand opportunities to understand the real world of manufacturing and engineering, work placements, internships as well as real world projects to tackle. This is expected to result in smarter, more employable students.

Built on the site of a former failed school in Devonport, the design and equipping of the 7 unique workshops at UTC has been transformational. No other educational establishment in the SW region compares in terms of space, layout, access functionality and equipment.

The judges acknowledged the success of this project in terms of local resident support and employer engagement.  It tackles the problem of skill shortages head on and, by “investing in tomorrow’s technologies”, has created an “optimistic environment”.

Victoria Advent House & Victoria Beacon Place, Cornwall

Nominated by Victoria Offices

Project cost: £5.6m

Serviced offices are not a new concept in large city centres but bringing the idea to rural Cornwall is and was only feasible due to the central location of the existing Victoria Commercial Centre just off the A30.

Victoria Commercial Centre has been used by hundreds of businesses and start-ups over many years but the idea of serviced offices in Cornwall has allowed new businesses to emerge from spare rooms and garages into a workspace where they can engage with like-minded businesses and present a professional image to clients and colleagues.

Built with a £3.1m ERDF Convergence Funding towards the £5.6m project cost, flexible working space for over 300 people is being provided with available support including telecoms, fibre broadband and office furniture helping start-ups to be up and running in the minimum time. Businesses also benefit from being able to expand or scale down on workspace depending on their needs, without delays or incurring costs.

The project also offers conference and training facilities enhancing its attraction as the centre of business in the centre of Cornwall and was 25% let within weeks of opening.

Built on a Brownfield site on the edge of a well-established industrial estate, the development has had minimal impact on the local environment and has not reduced the space available for agriculture or residential development.  The use of natural materials and colours in the external appearance gives the buildings a ‘refreshing appearance’ which are appropriate to their surroundings.

The buildings boast considerable environmentally friendly features which have achieved a BREEAM Excellent standard including passive characteristics such as extensive insulation achieving exceptionally low energy use, natural ventilation, natural daylight and solar shading. Functional elements include occupation-controlled and daylight-reactive lighting, biomass boiler and PV array, along with extensive energy metering and monitoring.

Where have the last 6 months gone? I can’t believe as I’m sat here writing this blog I only have three more days left with the Projects team before heading back to Bristol to do my final seat in Private Client. I think even more frightening and exciting is the fact that in 6 months’ time I will be a qualified solicitor!

As my last blog, (A change of scenery and a trip to HOYS!) focussed on the PFI/PP side of the department, I thought I would give you a little insight into what the Education team do, particularly as the majority of my seat has been working alongside them.

The team currently acts for over 130 education institutions including maintained schools, church schools, academies and free schools, as well as innovative Multi-Academy Trusts. The majority of the team’s workload is academy conversions and the establishment of free schools. Often the academies and free schools then join a Multi-Academy Trust.

Both academies and free schools have to be set up as companies limited by guarantee so I have been responsible for the company incorporations which often have to be completed within a specific time frame. This has meant that I have had to draft the necessary company forms, Articles of Association and Memorandum of Association. I have also had the opportunity to draft other documentation that is needed as the conversion progresses, such as the Funding Agreement and Commercial Transfer Agreement.

In any seat you can expect to be given a fair amount of legal research and I have been lucky enough to have produced research notes that have ended up being used in articles and as legal updates on our website, such as the legal update on the procedure for banning a parent from school premises.

As regular readers will be aware, Michelmores expect their trainees to get heavily involved in marketing and during this seat I was definitely thrown in at the deep end. I have been responsible for ringing target clients to try to arrange meetings for members of the team in the hope that they instruct Michelmores. Believe me; I probably sat staring at my phone for half an hour before plucking up the courage to make the first call! After you have done a few it really does get easier and the team seem to think  that I am very good at this – something I would never have dreamed as being one my skill sets.

Alongside this I have been successfully arranging informal meetings with clients the firm has acted for and have been along to a number of these. It has been great to see different academies and free schools thriving and to see first-hand how their new found freedoms are being utilised, particularly as prior to starting this seat I didn’t have a particularly positive opinion of academies as I associated them with failing schools.

I can honestly say I have thoroughly enjoyed my time down in the Exeter office and the time spent down here has been invaluable.

But….on a lighter note….what am I going to do without the gym??? Perhaps that could be the next development for the Bristol office, or perhaps that is wishful thinking!!

Lola Becker interviews David Howe, our Head of Property. He joined Michelmores from Clifford Chance and became a partner in 1990. He specialises in development and regeneration work, joint ventures, construction contracts and professional appointments. He is widely recognised as a leader in his field, however we are taking 5 minutes out of his busy schedule to ask our formidable questions…

Why did you choose Michelmores?

It was about a hundred years ago, I can’t possibly remember! It was a long time ago; I wanted to move out of London. I’d done a job with Bond Pearce in Plymouth, so I went to have a look at them as they seemed quite a reputable outfit. I arrived in what looked like a war zone (or a reconstructed war zone) and thought I can’t possibly live here and got blown in to Exeter on the way back to London and thought this looks a better alternative. I looked at the various firms that there were in Exeter and thought that Michelmores looked the best of a bad bunch really. Jim Michelmore bought me a pint. I think that was the clincher.

Why did you choose your area of law?

I couldn’t do anything else really! There’s a bit of a joke there, at Clifford Chance where I was, if you were too thick to do anything else you did Property. I did it because it would have made me much more portable outside of the City and I liked doing land law at the College of Law; that was my strong subject. I’m sure it’s very intellectually challenging and all of that, but those were the pragmatic reasons.

What has been the highlight of your career at Michelmores?

I think it was probably doing the Child Support Agency deal in Plymouth for EBC Group plc. We were opposite the Rotch Property Group ( Tchenguiz’s company- and for anyone who doesn’t knows about property they don’t come much bigger) doing a 100,000ft2 office prelet to the Secretary of State..We exchanged the Development Agreement on the evening before my son was born!. I was the grand age of 32,. Things happened much earlier then, so it’s been downhill ever since really. Both my children arrived on a Saturday. I can’t pretend they are so organised these days.

What advice would you give to trainees in the current climate?

Well I don’t know, what is it: ‘work hard and fear God’? (That’s not my quotation, that’s Mr Glanville Williams). I’m not sure I have any advice for trainees, these days they’re all very bright and more than capable of making their own way, and know far more what’s good for themselves than I can possibly tell them.

If you weren’t a lawyer what would you be?

Goodness knows. I’d probably be a property developer. There was a great joke at University that I was going to be an insurance broker as it was thought to be the most boring job in the world, but I don’t know, dealing with risk would be quite fun. I would have gone into insurance if I hadn’t been laughed at so much! You’ve sold out to Mammon in any of these things really; you’ve sold out on your principles.

If you were a biscuit, which would you be and why?

I’m very hard-centred I think, so something nutty. One that you’d break your front teeth on I think, so probably a ginger nut.

We highlight some of the key points relating to liability for CIL and some particular provisions of the CIL regulations and the DCLG Consultation published in April 2013 (the “DCLG Consultation”) which are relevant to landowners, developers and promoters of land for residential development.

What is caught?

CIL will be payable on “chargeable development” that is consented by planning permission. Chargeable development is very wide and includes any works in the creation of a new building, or any works done to an existing building.

Development that is not a “building” will not be chargeable to CIL.  Therefore, a development such as a golf course or marina would not in itself trigger CIL, however any buildings associated with that development (for example a club house or an office) may be liable to pay CIL.

How is CIL calculated?

The liability for CIL is calculated at the time planning permission “first permits development” by multiplying the chargeable net floor area by the relevant CIL rate, set out in the relevant adopted charging schedule, plus indexation.

How are existing buildings relevant?

If there are existing buildings on the site which have been in lawful use for a continuous period of at least six months in the last 12 month period preceding the grant of consent (or final approval of all reserved matters) then whether that building is either being demolished or retained, the area of development chargeable to CIL will be reduced by the gross internal area of that existing building

Would a permitted change of use from offices to residential trigger a CIL liability?

From 30 May 2013 premises in use class B1(a) office use can change to C3 residential use (subject to prior approval covering flooding, highways/ transport issues and contamination) without requiring planning permission, under permitted development rights.

Permitted developments are liable for CIL in the same way as development permitted by planning permission. Usually however, a simple change of use will not trigger CIL, as no new buildings are being created. However existing floorspace may only be used to offset the CIL liability where it has been in continuous lawful use for at least six months in the 12 months. So if the office building has not been in a lawful use for at least 6 months in the last 12 months and the use changes to residential, CIL could be triggered

Who is liable to pay CIL?

The person liable to pay CIL is the person who “assumes liability”. Liability is assumed by submitting an “assumption of liability notice” to the collecting authority.  Liability can be assumed by a number of parties who will each be held jointly and severally liable.

Assumed liability can be withdrawn at any time before development commences, and transferred to another person after commencement of development but before the sixty day payment window has expired.

What happens when no-one assumes liability?

Where no-one assumes liability, liability for CIL will be apportioned between those persons having a material interest in the land at the commencement of the development.   A material interest is either a freehold estate, or a leasehold estate for a term which expires more than seven years after the day on which planning permission is granted.

Therefore the effect of the CIL Regulations 2010 is that liability in default for CIL will run with the ownership of the land.  Where land changes hands, the liability will rest with the new landowner.

When does CIL become payable?

Liability to pay CIL arises on the first commencement of development of a chargeable development.

Development will be treated as commencing on the earliest date on which any material operation begins to be carried out on the land.   A material operation includes demolishing buildings, digging foundations or laying pipes, constructing a road or any material change in use of the land.

The current position therefore is that CIL may fall due even though construction of the buildings on the site may not have started. The DCLG Consultation proposes to clarify that demolition or site preparation works could constitute a separate phase of works. This would allow payment of CIL to be delayed until commencement of construction of the first substantive phase of a development and would be welcomed by developers.

Can CIL be paid in kind rather than in cash?

Yes – a charging authority may accept CIL payments of land (including existing buildings or structures) as an alternative to cash where the following conditions are met:

The land is acquired by the charging authority or a person nominated by the charging authority.

The landowner has assumed liability to pay CIL.

An agreement to make the land payment is entered into before development is commenced

How is affordable housing treated?

Social Housing Relief (SHR) allows full relief from CIL on those parts of chargeable development intended for social housing.

To qualify for SHR:

A claimant must own a material interest in the relevant land subject to planning permission and have assumed liability for CIL in relation to the whole of that development; and

The development must comprise of or is to comprise wholly or partly qualifying dwellings;

A qualifying dwelling is one which falls into one of two categories, both of which will be familiar, being either:

let by a Registered Provider or a RSL or a local housing authority on an assured tenancy (but not an AST) assured agricultural tenancy, introductory tenancy, demoted tenancy, secure tenancy or on an intermediate rent basis (ie at not more than 80% of market rent), or,

let on a shared ownership lease with a maximum of 75% initial equity sold, with annual rent not exceeding 3% of the value of the unsold equity and reviews capped at 0.5% above RPI.

The DCLG Consultation proposes the extension of social housing relief to incorporate intermediate housing including a broader range of low cost home ownership products, albeit subject to the discretion of the charging local authority.   In addition, communal and ancillary areas linked to social housing are also proposed to be granted exemptions under the DCLG proposals, which are widely welcomed.

How does CIL work in relation to phased planning consents?

Currently Regulation 9 of the CIL Regulations 2010 provides that in the case of a grant of outline planning permission which permits development to be implemented in phases, each phase of the development is to be treated as a separate chargeable development for CIL purposes.  This means that commencing development on the first phase should not trigger CIL liability for the later phases.

The DCLG Consultation proposes that phased CIL will be allowed for phased schemes, whether they are permitted by outline or full permission. This is a welcome proposal.

What if payment of CIL would make the development unviable?

Relief from CIL may be granted at the discretion of the charging authority if:

a)     Exceptional circumstances relief is available in the charging authority’s area; and

b)    A section 106 agreement has been entered into; and

c)     The charging authority:

• considers that the cost of complying with the s 106 agreement is greater than the levy due;
• payment of CIL would have an unacceptable impact on the economic viability of the development; and
• to grant relief would not constitute a state aid required to be approved by the European Commission

It will be interesting to see the extent to which this relief is actually granted.

Which CIL provisions are under review following the DCLG Consultation?

The changes proposed by this consultation include the following points of relevance to residential developers:-

• removing the potential double charge under which CIL can be charged and separate section 278 contributions can be sought in respect of the same road infrastructure;
• facilitating phased payments of CIL where developments can be built in phases, whether either outline or full planning permissions have been granted;
• postponing the date of CIL payment from implementation of permission to the carrying out of works other than site preparation;
• enabling the re-calculation of CIL if the level of affordable housing is varied after the grant of planning permission;
• extending the types of affordable housing which are eligible for relief from CIL to include, at the LPA’s discretion, discount market housing; and
• introducing relief from CIL to self-build housing.

It came up recently in discussion at a trainee meeting that it might be useful for someone to write a blog about getting a vacation scheme and ultimately a training contract. It seems particularly relevant to address this topic now at the time of year when many of you who are reading these types of blogs are filling out applications yourselves. In the last six months I have twice been given the opportunity to talk to law students about this subject. So, from these talks, I have compiled a few tips on filling out applications and preparing for interviews, in the hope that it might prove useful and/or at least reassuring to someone.

For simplicity, I have split this blog into three installations; Part 1 – ‘Before You Apply’, Part 2 – The ‘Dreaded Application’ and Part 3 – ‘The Interview’.

Before you apply

Think about what type of firm you want to work for; a small firm, a high-street firm, a regional firm or a large city firm.

Not only will each firm require a different approach when you are filling out your application, but it will also be a different job when you get there; from the general ethos of the firm to the hours you work and your pay. Also, remember that you may well be asked at interview why you have chosen that particular firm and how you know it is the type of firm that you want to work for.

Although it is important to get a training contract, it should not be at any cost. You need to be sure that you are going to be happy in the firm that you are going to work in. If you don’t enjoy your job and you don’t feel like you fit in with the firm you have chosen, it will affect your ability to progress and get the most out of your training.

Do work experience!

I am sure that this point may appear to be a no-brainer, but Law is such a competitive profession, I cannot stress enough how crucial work experience can be. It shows that you are willing to graft, and are interested and committed, not only in relation to the legal profession but also reflecting your general work ethic.

Not only does work experience look brilliant on your CV – it will also help you to get a better understanding of what you want to do in practice and where you will be happy. My work experience at Michelmores was the reason I wanted to apply for a vacation scheme and now I work here! Don’t be afraid to be persistent when you are trying to get work experience, but do try to find the right balance between persistent and pushy.

Do any legal work experience that you can and try not to focus too much on only getting it in areas you are currently interested in. If you can’t get legal work experience, then try to get something elsewhere. It is surprising how you can draw on experiences which you may think are totally irrelevant to the legal profession, in both applications and interviews.

For example, I worked on a farm as a labourer between the age of 14 and 18. In my application for a training contract I used this experience to demonstrate my ability to work within a difficult team under tough circumstances, to show commitment in achieving a goal and how I overcame initial difficulties and prejudices in persuading my boss that I should be given more responsibility and work. It is really useful to use slightly novel experiences in applications as it will make yours stand out from the hundreds that firms receive. When I started at Michelmores last September, our head of HR told me that she remembered my application and stories about potato farming and having to pull dead animals out of machinery! As I deferred my training contract a year – that means it stuck with her for 3 and a half years after reading it. Similarly, one of my supervisor’s first comments on meeting me in September was “oh yes you’re the potato girl”. Take what you will from that!

Research your firms well before you make applications:

• Look at their websites and brochures.
• What are their future goals?
• How do they market themselves?
• Look at what current trainees say about them.
• Get a feel for whether they are a firm that have an ethos that you identify with/want to work for.

You also need to think about what area of law you might want to work in – although having said that, I don’t think that any firm will be impressed if you declare a passion for working in only one area of law. You don’t want to risk limiting yourself in that respect – especially as your feelings may well change not only throughout your degree and LPC, but also when you actually get experience of an area in practice.

I have learnt that in practice a general knowledge of all areas of law is a real benefit. So, even if you don’t have the experience to make a solid decision yet, be prepared to show a preference for an areas or areas; property, family, criminal or corporate etc. and find firms to apply to that cover that area of work. This also links to what I said previously about researching your firm and being happy working there in the long term.

As a general piece of advice, it is useful to be aware of the need to build your own personal brand as a professional. Social media such as Twitter and particularly LinkedIn are excellent ways of doing this and they are becoming increasingly relevant in business marketing. Make your online profile(s) look impressive. Also, have a look at firms’ online presence via Facebook, Twitter, blogs etc. – this approach will give you a useful insight when you are researching them initially.

When a relationship breaks down, there are many issues to be resolved. If the parties are parents, most will want to ensure that the arrangements for the children are the best that can be achieved in the new situation.

The majority of parents are successful in finding solutions to disagreements by discussion and negotiation, often with guidance from their solicitors. They recognise that, even though their own relationship has run its course, the children continue to need love, affection and support. Research over many years, shows convincingly that there children who do best are those who continue to have a loving relationship with both parents.

Sadly, there are situations where the parents just cannot agree. Problems can arise over a wide variety of issues, such as

• where the children are to have their primary home
• the time that the children will spend with each parent
• the arrangements for holidays, Christmas and birthdays
• the financial support that is to be provided
• whether one parent should be permitted to move area or even abroad with the children
• if the children are living with their mother who remarries, whether she should be permitted to change the surname of the children
• the school to be attended.

All the above examples are important but sometimes there can be really serious issues which divide the parents such as:

• whether a child should have a medical procedure, even one which could be life saving
• whether a child should be brought up to follow a particular religion or none
• a particular method of child rearing, such as home teaching over conventional schooling or the continuation of breastfeeding for much longer than is conventional in this country
• topically, whether a child should be encouraged to support a terrorist organisation.

If it is not possible for the parents to find a solution to such problems, either of them has the option of going to court. However, the recent launch of a Children Arbitration Scheme is now available as another option.

This scheme is a significant development in the options available to parents. Arbitration offers a tailor-made and flexible alternative to court proceedings that is likely to be quicker and cheaper. Additionally, the parties are able to exercise more control over

• timing (which can be essential when it comes to schooling or holidays)
• venue and
• choice of arbitrator.

Parents wishing to use the arbitration scheme sign a binding agreement to arbitrate. The decision of the arbitrator is final and can be converted into a court order if necessary.

The arbitrator, unlike a judge in court, is not permitted to meet the children but can direct an independent social worker to conduct an investigation (which would include speaking to the children) and produce a report with recommendations based on the social worker’s findings.

The essential feature of the arbitration scheme is that the outcome must be what is best for the children. The scheme contains a system under which the arbitrator will be able to obtain information about any known safeguarding issues.

Throughout the process, parties can be represented by their lawyers and can obtain legal advice.

Further information can be obtained from the website www.ifla.org.uk

This article was first published by LexisNexis in September 2016 and is reproduced by kind permission.

IP & IT analysis: David Thompson, partner and Freya Lemon, solicitor at Michelmores, explain the EU protected food name scheme and how this could potentially be affected by Brexit.

How does the EU protected food name scheme work at present?

Under the EU’s Protected Food Names (PFN) scheme, certain regional and traditional food products are afforded legal protection throughout the EU against unauthorised production and reproduction.

Akin to a trade mark, the PFN scheme serves to validate an intellectual property (IP) right in a product description, which is then ‘owned’ by producers in a particular region, using specific methods and ingredients.

There are three types of PFN under the scheme for food (and some drink) products:

• Protected Geographical Indication (PGI)—the recipe or method of production is protected and must also be carried out within a designated geographical area. Examples of PGI products include the Cornish pasty, Scottish wild salmon and Yorkshire Wensleydale cheese
• Protected Designation of Origin (PDO)—the recipe or method of production is protected and must also be carried out within a designated geographical area and the ingredients must also come from within the same geographical area. Examples of PDO products include Cornish clotted cream, Jersey royal potatoes and Stilton blue cheese
• Traditional Speciality Guaranteed (TSG)—the recipe or method of production is protected. Examples of TSG products are the traditional bramley apple pie filling and traditional farm fresh turkey

If an applicant wishes to register a UK product under the PFN scheme, they must first seek approval from the Department for Environment, Food and Rural Affairs (Defra) (as the current national authority). Defra’s approval then paves the way for consideration and, if successfully approved, registration by the European Commission. Such registrations are indefinite in the EU and also serve to supersede any trade mark which may previously have been registered with the same product name.

PFN products can now be easily distinguished by the presence of a mandatory designated EU logo indicating the requisite PGI, PDO or TSG registration. These logos were introduced on 4 January 2016.

What are some of the most valuable British protected names?

In comparison to other EU countries such as France, Spain and Italy, the UK has relatively few PFNs, at 77 currently (including those pending registration). Nonetheless, the PFN scheme is valuable to the UK economy and to those involved in the production and sale of protected foods.

Cornwall and the wider south west region benefit from a number of well-known PFNs. The humble Cornish pasty was the first British product granted PGI status. The industry associated with the Cornish pasty is vital to its region’s economy, employing over 2,000 people and generating £300m of trade per annum, according to the Cornish Pasty Association.

Other West Country household products include West Country farmhouse cheddar cheese and Cornish clotted cream (each PDOs).

Salmon is Scotland’s largest export food and both Scottish farmed and Scottish wild salmon have been awarded PGI status. According to the Scottish Salmon Producers’ Organisation, the worldwide retail value of Scottish farmed salmon is over £1bn.

Other well-known PFNs include:

• Stilton blue cheese (a PDO)
• Yorkshire Wensleydale cheese, the Melton Mowbray pork pie, Scotch beef and the traditional Cumberland sausage (each PGIs), and
• Jersey royal potatoes (a TSG)

A recent case in the Isle of Man has revisited the ability of the court to overturn a decision by trustees when the consequences of that decision are different to those anticipated.

The law in this area has been the subject of much consideration in recent years.  Historically, trustees’ decisions could be overturned if the trustees would not have acted as they did under different circumstances or with different advice, particularly where the trustees failed to take into account considerations that in fact they ought to have taken into account (usually tax considerations), or where they had taken into account considerations that they ought to have ignored.  This is known as the rule in Hastings-Bass and previously it applied whether or not there had also been a breach of fiduciary duty by the trustees.

However, in the jointly heard cases of Pitt v Holt and Futter v Futter, the Supreme Court reconsidered the scope of the rule in Hastings-Bass and made clear that trustees’ decisions could only be set aside if they are in breach of their fiduciary duties.  On this basis, if trustees take advice which turns out to be wrong, a claim should be made against the professional advisers in negligence (rather than an application being made to the court to overturn the relevant decision).

In the recent Isle of Man case the claimant was the settlor and beneficiary of a number of Isle of Man trusts.  The defendant trustee had granted call options which provided a way for the claimant to take back beneficial ownership of the trust assets.  The call options resulted in potentially adverse tax consequences for UK resident beneficiaries and the claimant returned to the UK.  The trustee had not taken appropriate tax advice and relied on other advisers to obtain this.  The trustee would not have granted the call options had the tax consequences been understood.

The claimant applied for an order for the call options to be set aside under the rule in Hastings-Bass or alternatively on the basis of mistake.

In this case, the trustee had committed a breach of duty in failing to receive tax advice on which they could rely and the call options were set aside.

First, this is therefore an example of the court making clear that a trustee should always obtain tax advice when required and not rely on other advisers to take appropriate steps or make assumptions that someone else is dealing with this element.

The case is also interesting as it casts doubt on whether the restricted rule in Hastings-Bass is good law in the Isle of Man.  It signals a potential divergence between the law in that jurisdiction and English law in this still unsettled area.

At the time of the Brexit referendum it would be easy to have overlooked the publication of some new clauses in the Finance Bill (which are in force from 5 July) concerning profits from either dealing in or developing real estate in the UK using offshore entities. This followed on from the technical note published by HMRC at the time of the Budget which sought to counteract the three routes used to keep profits from developing UK land from being subject to UK tax.

The three areas addressed by the legislation are:

1. Offshore companies developing real estate in the UK but which have no “Permanent Establishment”;
2. Fragmentation – splitting up development roles to circumvent UK tax law; and
3. Enveloping – selling wrapper entities which develop real estate rather than the real estate itself.

The technical note setting out HMRC’s intentions had also asked for comments on the proposals and British Property Federation amongst others gave comments from the real estate industry. There were rules in this area already, but the new legislation widens these, possibly too much.

Background

Real estate assets are usually held either as investment assets to exploit a rental stream of income and hopefully obtain capital growth, or trading assets for example development situations where an entity will purchase land, construct a building and immediately sell it; property trading where existing properties are purchased with a view to immediate resale would also fall into the category of trading rather than investment.

The UK tax treatment of investment assets is usually fairly clear in that to a large extent it will depend on whether the person making the disposal of an asset is resident in the UK for tax purposes.  If they are then capital gains tax/corporation tax on capital gains would apply, and if they are not a UK tax resident then there would be no tax.  This distinction has recently been changed in relation to residential property, with the introduction of non-resident capital gains tax.

In relation to trading the position is more complex.  A company which is tax resident in the UK will be taxed on any trading profits.  A non-resident company will be liable to UK corporation tax on any trading profits from a trade it carries out in the UK through a permanent establishment.  Finally even if the company is non-resident and does not carry on a trade through a permanent establishment in the UK it can have a residual liability to UK income tax on its UK source trading profits. While there are equivalent rule changes to income tax, focusing on the corporation tax change will serve to illustrate the issues here.

What structures have been used and what has been the effect?

As above, a UK resident company will pay tax on all of its development profits.  The question was therefore whether there is a route to pay a lower amount of tax using any offshore structures.  The sort of structure which has brought about the new legislation involved establishing a company in a well-chosen offshore jurisdiction, such as Jersey, and appointing UK contractors to develop land owned by the Jersey company.

The argument runs that the Jersey company would only be subject to UK tax if:

• it was UK resident (the Jersey incorporated company would be Jersey resident unless central management and control are exercised in the UK); or
• be carrying on a trade through a permanent establishment in the UK.  With the correct choice of jurisdiction comes a double tax agreement (DTA) which does not include a building site within the definition of ‘permanent establishment’ (i.e. this is a departure from the standard OECD double tax agreement); or
• it has a source of UK trading profits (again, a well-chosen jurisdiction DTA with the UK will not preserve the UK’s right to tax profit from UK land).

Therefore the argument runs that a Jersey company effectively carrying out development cannot be taxed in the UK on development profits.

HMRC have never fully accepted this position and also now have diverted profits tax in their armoury if needed. Nevertheless they clearly felt the need to put the position beyond doubt and extend the law, the territorial scope of UK tax and, for good measure, change the benign DTAs which were being exploited.

Amending Relevant DTAs

The DTAs between the UK and Jersey, Guernsey and the Isle of Man have been changed with effect from Budget Day 16 March 2016, to bring this into line with the OECD Model.

The income of a person in the state of residence (e.g. Guernsey for a Guernsey company) deriving from real estate in the other state (UK) is only taxable in the state where the real estate is located.

Gains from real estate may be taxed by the source state e.g. UK for UK real estate.

Finally, gains from disposals of shares or comparable interests (e.g. unit trusts) which derive at least 50% of their value directly or indirectly from real estate in the source state, then the source state (UK) can tax it.

In tandem with these changes one element of the new UK tax rules counteracts tax advantages including any obtained by DTAs if the advantage is “contrary to the object and purpose of the treaty” – a phrase which puts a smile of barristers’ faces, as there are likely to be a number of views as to what the purpose of the treaty is.

New UK Rules – main provisions

New UK legislation is drafted in what appears to be a fairly effective way in that it adds a completely new head of charge separate from taxing profits from trading through a permanent establishment in the UK and instead charges a non UK resident company to corporation tax if it carries on a trade of dealing in or developing UK land.

The taxing provisions of the new rules apply where certain persons realise profits or gains from disposals in UK land and certain other conditions are met.

The persons in question are first those acquiring holding or developing land, but also as the law is widely cast, anyone associated with that person at a relevant time (the period from when activities begin to 6 months after the disposal) as well as any person party to or concerned in arrangements to realise profits or gains by indirect methods using a series of transactions.

Here it is worth noting that the test for being associated is cast more widely than most of the UK legislation designed to catch avoidance situations.  The usual control tests apply but also any entities which have their results consolidated for accounting purposes or even have a 25% common shareholder are caught.

In addition one of conditions A to D below must be met in relation to the relevant land, these being as follows:

• condition A is that the main purpose, or one of the main purposes, of acquiring the land was to realise a profit or gain from disposing of the land.
• condition B is that the main purpose, or one of the main purposes, of acquiring any property deriving its value from the land was to realise a profit or gain from disposing of the land.
• condition C is that the land is held as trading stock; and
• condition D is that (in a case where the land has been developed) the main purpose, or one of the main purposes, of developing the land was to realise a profit or gain from disposing of the land when developed.

These new provisions are draconian and yet should be effective against the sort of development structures which have been used in the past to try and circumvent a UK tax charge.  The worrying aspect of it is is that there is no clear line where trading stops and investment starts, i.e. this legislation could in theory be used to tax investment gains by non-UK entities, which would be a matter of extension of the territorial scope of UK tax.

Various industry voices have called for guidance in that HMRC need to set out that genuine investment situations are not under threat. There have been some helpful remarks by HMRC, though some will be claiming that non-UK resident entities will be ‘taxed by law, and untaxed by concession.’ It is expected that HMRC will have reserved the extra powers to tax gains rather than trading income in borderline situations where either the threat of the legislation being used might be enough to prevent certain structures being used, or if they are then HMRC would be more sure of victory in any dispute.

Fragmentation

Wherever anti-avoidance legislation is brought in, there will always be the reaction in some quarters as to whether even the new law can be neatly circumvented.  Fragmentation, as the name suggests, is where the overall functions of holding, developing and selling are split.  No entity which is within the new tax realises a large part of the profits.  Another offshore entity carries out the development and siphons off most of the profit (though within the limits of the transfer pricing legislation), though not becoming UK resident but rather making use of UK third party sub-contractors.

The argument would then run that a landowning company will pay the new tax, but on a much reduced level of profit, and the developer company is only supplying services and does not strictly deal in or dispose of any land so is not strictly caught by the new tax.  The new provisions counter this by setting out that if one company is trading in property and another associated company provides finance or professional services then profits or gains which will be taxed are deemed to be what would have been the profit or gain if the two entities were not distinct but that everything had been done by the landowning company.

Enveloping

Enveloping is where there is an indirect disposal of land via selling the entity which owns it.  If a company develops a property with the intention of keeping it and letting it, then it can be argued that that company was not trading for tax purposes but rather had a long term investment aim.  If the owner of the shares in that company disposes of the shares, it can sell the shares without there being any real estate disposal and if it is not carrying out any kind of trade in the UK, it should not be taxed.

There are existing rules known as the ‘transactions in land’ rules which are designed to ensure that enveloping does not secure a tax advantage.

Under the new rules, the profits of a trade of dealing in and developing UK land will be taxable where:

1. A person realises a profit or gain from the disposal of any property (the word here being used in its widest possible sense and includes share disposals) which at the time of the disposal derives at least 50% of its value from land in the UK;
2. The person is a party to or concerned in an arrangement concerning some or all of the land; and
3. The main purpose, or one of the main purposes, of the arrangement is to be able to develop the land and realise a profit or gain from a disposal of property deriving whole or part of its value from that land.

While under the previous rules there was no limit on how much land the investment vehicle must hold before the anti-enveloping rule applies, now it has been increased to 50% of the value of the shares being derived from UK land.  The definition of disposal has been widened so that going forward, disposal will include any case where property is effectively disposed of by one or more transactions or by any arrangement.

Conclusion

From the statements made by HMRC and the breadth of the legislation, it is clear that they are taking no chances and HMRC are weary of avoidance structures in this area.

The inevitable question is whether HMRC have given themselves  powers which are so wide as to create uncertainty in relation to offshore entities holding UK real estate as an investment. Offshore investors would be well advised not to throw away any documents showing their intention to invest rather than to trade.

Overall the new rules create further uncertainty in a post-Brexit market.  Any further guidance to the effect that these powers will only be used in situations where HMRC perceive avoidance and not to attack genuine investment activity would be welcome.

The recent judgement from the Court of Appeal in Suffolk Coastal District Council –v- Hopkins Homes Limited and The Secretary of State for Communities and Local Government [2016] EWCA Civ 168  has been granted permission to be appealed to the Supreme Court.

As a brief reminder, the Court of Appeal held previously that unless a local planning authority is able to demonstrate a five year supply of deliverable housing sites, then all “relevant policies” ancillary to the supply of housing were to be deemed out of date. A non-exhaustive list of “relevant policies”  include policies for greenbelt land and the conservation of wildlife and cultural heritage. Please click here for our detailed report on the Court of Appeal judgement.

Suffolk Coastal District Council, along with Cheshire East Council, have now been granted leave to have a joint appeal heard by the Supreme Court. A date for the hearing has not yet been set, but it is thought that it will be heard at some point between April and July 2017. The focus of the appeal from the two local councils is likely to centre on the interpretation of paragraph 49 of the NPPF; namely whether “relevant policies” should be construed on a narrower basis so as to not include ancillary policies and to only effect policies that directly and positively concern housing supply.

Whatever the outcome at the Supreme Court, the ramifications for local planning authorities are likely to be significant.

For more information please contact Lucy Smallwood on lucy.smallwood@michelmores.com or 01392 68755