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

Following the referendum, there has been much talk about the impact Brexit may have on existing contracts involving companies trading between Europe and the UK.

This opinion piece seeks to separate speculation from reality and answers a number of FAQs about the impact of Brexit on cross-border disputes.

Our business to business contracts contain a choice of “English law”. Do we need to change this?

The rules governing which law applies to a contract between parties based in different countries in Europe are set out in the two Rome Conventions[1]. These Conventions state that European Member States must give effect to a choice of law stipulated in a contract, regardless of whether that is of a country which is a member of the Rome Convention.

Accordingly, if your contracts contain an express choice of English law, then regardless of Brexit (and a UK withdrawal from the Rome Convention), other European countries who continue to be members of the Rome Convention would be required to respect a choice of English law. So in reality, nothing should change on Brexit. A choice of English law in a commercial contract should continue to be respected by Rome Convention countries in Europe.

Our business to business contracts say that any disputes are to be heard by the Courts of England and Wales exclusively – do we need to change this?

The rules governing which European country’s Court has the right to hear and determine a dispute are set out in the Brussels Regulation[2]. These rules provide that the Courts of an EU Member State must respect a choice of Court in a contract in favour of the Courts of another EU Member State. So if your opponent decides to bring Court proceedings against you in Spain, in breach of an express requirement in your contract that the English Courts are to hear the dispute, the Spanish Courts are obliged to halt their proceedings and let the English proceedings run their course.

It is important to be certain about which Courts are able to determine a dispute, for the following reasons:

It avoids the legal costs associated with arguing over the point in Court, and potentially having to deal with parallel proceedings issued in two countries at once which concern the same dispute;

At the outset of a commercial relationship, it is best to clearly identify which Court (or Courts) is able to give a Judgment, to ensure that any Judgment you obtain is actually going to be enforceable in another jurisdiction. For example, you may secure an English Judgment against a French company which obliges it to pay you money. Your opponent’s assets may well be based in France, so you will want to know (before you incur the costs of proceeding through the English Courts) that your English Judgment will ultimately be recognised and enforced in France, as if it were a French Judgment.

Without the certainty provided by the Brussels Regulation, European Courts could, theoretically, refuse to recognise an express choice of English Court jurisdiction in a commercial contract (and so refuse to enforce an English Judgment brought to them for enforcement). But is this going to happen in reality?

One factor which may assist the English Courts is that the EU has ratified the Hague Convention on Choice of Court Agreements[3] (HCCA). This convention could be important in the light of Brexit. If the UK ratifies the HCCA on its own behalf, then this would provide a consistent framework for European Courts to recognise an express choice of English Court jurisdiction in a commercial contract. Other non-European countries, such as Mexico and Singapore, have also ratified the HCCA.

Without a specific set of rules in the Brussels Regulation or without any other replacement international convention, each European country’s Court would need to determine whether it has jurisdiction to deal with a dispute that a party has brought to it, according to its own national law. Most commentators agree that our major trading partners in Europe will endeavour to give effect to a choice of English Court jurisdiction, regardless of the lack of any treaty or international convention framework.

So in reality, it should not be necessary to change your commercial contracts if they give the Courts of England and Wales exclusive jurisdiction to deal with a dispute.

Some of my business to business contracts do not contain any choice of governing law or jurisdiction and I regularly trade internationally – do I need to specify these?

The position for business to business contracts which do not contain an express choice of governing law or jurisdiction is more uncertain in light of Brexit. At the moment, there are specific rules which govern which European country’s law or jurisdiction applies in certain situations, where there is no express choice of governing law and jurisdiction. Those rules will cease to apply on Brexit and these issues will be determined according to the local law of the country where a party has brought a dispute to be heard.

A new Hague Convention[4] is in the process of being negotiated which could assist parties in this situation. However, it is a long way from signature and ratification.

As a result, we recommend that businesses always include a choice of law and jurisdiction in their business to business contracts where they are trading in Europe or in other countries around the world.

Will my ability to serve English proceedings on a party in Europe be affected by Brexit?

Yes – potentially. At the moment, there is a specific set of rules under the EU Service Regulation which govern how Court proceedings are to be served within the EU, in order for service to be effective.

Without these rules, in order to validly serve English proceedings in Europe, the main options are to serve either in accordance with local rules in the country where the party being served is based, through formal channels using the Hague Convention (which can be very slow indeed) or by some contractually agreed method.

Serving proceedings overseas can be expensive and time consuming. For this reason, if you are embarking upon a significant new commercial relationship or reviewing your existing contracts with a party based overseas, we strongly suggest requiring them to nominate an agent to accept service of Court proceedings in England, if a dispute ever arises.

We are negotiating a significant new contractual arrangement with a business in Europe – should we opt for Arbitration (rather than Court proceedings) to determine any disputes that might arise?

Arbitral awards are generally enforceable in states that have ratified the New York Convention. This will not change in light of Brexit, so arbitration is now increasingly seen as a more ‘certain’ option for dispute resolution in Europe.  Arbitration also has the benefit of being confidential, but it is not necessarily quicker or cheaper than Court action.

If you are considering requiring disputes to be referred to arbitration rather than the Courts, it is important to bear in mind that certain countries (like Italy for example) do not recognise interim remedies granted by an arbitrator. For instance, you may be concerned that your opponent who owes you money, based in Italy, is taking steps to put assets out of your reach. And, as such, you may wish to take steps to freeze or ring fence their assets. An arbitrator’s decision would have no effect in this situation – you would need to take steps directly through the Courts in Italy. For this reason we often advise clients who opt for arbitration to ensure that their contract specifically allows them to take interim steps in an appropriate local Court to preserve their position, until the arbitration has run its course.

For high value international contractual disputes in particular, we expect to see a rise in the use of arbitration as an alternative means of dispute resolution in the short term, in light of the outcome of the EU Referendum.

[1] Rome I (EC) 80/934; Rome II (EC) 864/2007

[2] Brussels Regulation “Recast” (EU) 1215/2012

[3] Hague Convention on Choice of Court Agreements 2005

[4] The Special Commission on the Recognition and Enforcement of Foreign Judgments; the “Judgments Project”

Sara Chisholm-Batten is a Partner in our commercial disputes team specialising in cross border enforcement measures. She has a wealth of first hand international experience in this area in Europe and around the world, including in Emerging Markets.

If you would like to discuss any of the issues set out in this article which may affect your business, please do not hesitate to contact our team of specialists.

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Anyone who has been wading through training contract applications recently will have noticed that ‘marketing and business development’ are becoming popular buzzwords, in a similar way to ‘commercial awareness’.  In a competitive legal market and fluctuating economy, it’s essential for trainees to become confident with marketing and business development during their training, learning more than just the legal ropes.

I asked Grace Williams, our marketing and business development manager, to explain exactly what it’s all about:

‘Marketing and business development work hand in hand, but the principles are quite different. For Michelmores, marketing focuses on the satisfaction of our clients, their needs, wants and requirements. Our aim as marketers is to maintain a professional and consistent image for the firm through our website, marketing collateral and public relations. Business development, however, is about seeking opportunities to form partnerships and strategic relationships with referral sources and target markets in order to obtain new clients.’

How can I get involved?

At Michelmores there are many opportunities to get involved, and trainees are actively encouraged to do so. During my training contract so far I have been invited to a range of events from drinks receptions and business breakfasts, a classic car event, and a conker competition with a local firm of accountants (to name a few)! These events are a great opportunity to get to know fellow professionals, build your networking skills, and understand a bit more about our clients and their businesses.

Why should I get involved?

As a final note, I asked Grace why she thought it was important for trainees to get involved:

‘It’s so important for trainees to get involved in marketing and business development as early as possible. The benefits are two fold; it increases a trainee’s awareness of the business, how it operates, its strategy and the process to obtain new work and seek opportunities. Secondly, it allows them to begin building their own network which they will carry throughout their career.’

Marketing and business development is an essential part of your training contract. On qualification you will be expected to be ready to generate your own work and build your personal network.  It is extremely valuable to start building on these skills from day one and there are plenty of opportunities do that at Michelmores.

If you have any other questions on being a trainee please comment below or tweet us @MMTrainees

Michelmores’ Real Estate team has advised on all aspects of Exeter’s newest student accommodation development, offering 159 new rooms for students at the University of Exeter and revitalising the city’s Cricket Club facilities at Prince of Wales Road.

Michelmores acted on the £8 million development from conception to completion. The project involved Yelverton Properties Developments Limited acquiring an interest in the land securing the planning consents to redevelop the site taking down the former cricket pavilion on the site, and re-siting and replacing it with a new state-of-the art two-storey pavilion, built in conjunction with the new student accommodation and disposing of the student accommodation to Curlew Capital.

The development was undertaken by Yelverton Properties and their development and funding partners, Campus Development Management Ltd and Curlew Capital. The main contractor was Midas Construction.

Students will take up residence in the new accommodation in September 2016 for the new academic term.

Partner Joanna Damerell, who led the Michelmores team said:

“This is a very exciting project for the city, not only providing much-needed and high quality accommodation for students, but also revitalising a popular community sports facility. It has been a real pleasure to support this successful project from start to finish.” 

In our May update on the Consumer Rights Act 2015 (CRA), we reported the Government’s announcement that maritime, air and rail services will not be exempt from the CRA scope. Instead, the implementation date has been delayed until 1 October 2016.

At the time of that update, we were still awaiting publication of the Government’s response to the consultation that influenced their decision. This has now been published and the decision not to exempt transport services has been qualified.

The relevant CRA Sections

The implementation delay in respect of the transport sector relates only to sections 57(3) and 57(4)(a) of the CRA.

Section 57(3) restricts traders who supply consumer services from limiting their liability to less than the price paid for such services, if they are in breach of relevant statutory obligations. Those obligations include providing services within a reasonable time, at a reasonable price and with reasonable care and skill.

Section 57(4)(a) deals more generally with constraints on the ability of service providers to restrict consumer remedies.

Purpose of the Government’s consultation

The consultation focussed on a number of points and concerns, summarised below. Responses were received from a variety of transport industry and consumer bodies.

If sections 57(3) and 57(4)(a) CRA are applied to the transport sector:

• The relevant CRA provisions could affect current compensation schemes. These schemes contain terms that have the effect of limiting transport operators’ liability to pay compensation; often regardless of the reason for any delay or cancellation. Such compensation tends to be based on fixed rates or percentages and, as such, the amount recoverable by a consumer will often be less than the full ticket price.
• There is a risk of over-complicating and potentially duplicating existing schemes, which already provide an established package of remedies for consumers in the transport sector.
• Concerns were raised that the factors above might result in additional cost to transport operators, which could be passed on to tax payers/consumers. This argument was particularly prevalent in Consultation responses from transport industry bodies.

If the CRA sections are not applied to the transport sector:

• There was concern that existing compensation scheme limits would apply even in the event of service disruptions caused by an operator’s failure to comply with the statutory rights. This would put consumers in the transport sector at a disadvantage to other sector consumers, and out of pocket where there have been service failings by transport operators.
• Limited and partial CRA exemptions for the transport sector may be overly confusing for consumers. This and the above point were raised primarily by consumer groups in their Consultation responses.

The Consultation outcome:

In reaching its decision, the Government considered that consumer interests are best served if transport sectors are not exempted from the CRA provisions. The financial and logistical risks posited by the transport industry bodies were considered to be outweighed by the potential benefits to consumers.

In particular, the Government stressed that, provided transport operators perform their services with reasonable care and skill, there is no reason why they should incur any additional costs under the CRA regime.

As such, the CRA will apply to the aviation and maritime sectors from 1 October 2016.

Implementation delay for rail transport operators:

For the rail industry, the Government considers that an additional 12 month exemption period for Section 57(3) CRA is necessary for some (but not all) rail operators:

• A further 12 months is being afforded to EU Licenced rail passenger operators, to allow the industry further time to review their compensation schemes. Section 57(3) CRA will not apply to these operators until 1 October 2017. All other CRA provisions will still apply from 1 October 2016.

EU licenced rail operators are those operating mainland services in the UK pursuant to an EU Rail Licence. This includes London Overground rail services.

• Operators providing services on only local and regional standalone infrastructures were not included in the original exemption and CRA has applied since it came into force on 1 October 2015. This includes London underground, metro services and heritage/tourist rail passenger services.

What next?

All businesses providing consumer-facing services should now be aware of the enhanced rights afforded under CRA, albeit some transport sectors have had a period of grace before being bound by those rights.

With implementation deadlines now determined, the transport industry and service providers individually should be actively addressing the requirements under CRA.

Businesses should be checking their terms and conditions and, in particular, the compensation mechanisms where services are delayed or cancelled and, in the case of air travel, if boarding is denied or a passenger is downgraded.

Compensation schemes may still be applied. However, they will need to comply with the CRA where such compensation is being paid as a result of a breach of a consumer’s statutory rights.

Of particular relevance are the following requirements:

• Refunds for any breach of statutory rights cannot be limited to less than the price a consumer has paid for their ticket.
• Refunds must be paid:
  • using the same means of payment as the consumer used to pay for the service;
  • without undue delay and within 14 days of the date a refund is agreed; and
  • without any fee being imposed on the consumer.

Any breach of the CRA may entitle a consumer to pursue the operator through the courts to enforce their rights.

Please click here for a link to the full Response to Consultation.

The Current Law and Policy

In April 2015, the Town and Country Planning (General Permitted Development)(England) Order 2015 (the “GPDO”) statutorily embedded the right to change the use of agricultural land and buildings (subject to size thresholds, limitations and conditions and restrictions) in England.

Under the GPDO, agricultural land and buildings can be changed to any one of the following uses:

• a flexible use (Class R): any use falling within Class A1 (shops), Class A2 (financial and professional services), Class A3 (restaurants and cafes), Class B1 (business), Class B8 (storage or distribution), Class C1 (hotels) or Class D2 (assembly and leisure);
• an educational use (Class S): “state-funded school” or “ registered nursery”;
• a residential use (Class Q): the conversion of a maximum floor space of 450 m2 into three dwellings, subject to siting, noise, contamination, flood risk, design or the transport or highways impacts of the proposal being acceptable.

The new permitted development rights have been incorporated into the Planning Practice Guidance (“PPG”). Permitted Development to change the use of agricultural land and buildings into residences was previously covered by Class MB which was far more restrictive in practice than originally intended and Class Q goes some way to remove some of the restrictions that existed under Class MB. As no planning application is required the process should be cheaper and easier.

Teething Problems

It inevitably takes time for organisations to get to grips with new legislation and policy. One of the main issues that Class Q applicants have encountered is that there are still some Local Planning Authorities (“LPAs”) resisting permitted development under Class Q on the basis of “sustainability of location”. This is illustrated by the recent appeal of Sawbridgeworth (East Herts DC [3140675] which was decided on 12 May 2016.

In Sawbridgeworth, there was no dispute that the qualifying criteria of Class Q were satisfied. The LPA raised no concerns in relation to noise, contamination, flood risk, design or the transport or highways impacts of the proposal; the only remaining issue was whether or not the location or siting of the proposed dwellings made it impractical or undesirable for residential use.

The LPA’s case was that the PPG contravenes the National Planning Policy Framework (the “NPPF”) and in particular paragraph 55. Relying on paragraph W.10(b) of Part 3 of the GPDO, the LPA claimed that it must have regard to the NPPF, so far as relevant to the subject matter of the prior approval, as if the application were a planning application.

However, the Inspector rejected this approach and stated that the PPG (as updated in March 2015) is clear that Class Q does not apply a test in relation to sustainability of location, especially considering that agricultural buildings will be located in a rural setting. Paragraph 109 of the PPG states “that an agricultural building is in a location where the local planning authority would not normally grant planning permission for a new dwelling is not a sufficient reason for refusing prior approval”. Accordingly, the re-use of a rural building to meet the rural housing demand is the correct approach.

The LPA has until the end of June to appeal the Inspector’s decision in Sawbridgeworth. This case clearly shows the lengths to which LPAs go in order to hold off development pursuant to Permitted Development Rights and begs the question: how can surplus agricultural buildings be reused and converted into housing in practice?

Looking Forward

The Government’s 10-point plan for boostingproductivity in rural areas published in August 2015 promised that it would “increase the availability of housing in rural areas, allowing our rural towns and villages to thrive, whilst protecting the Green Belt and countryside”. In accordance with its plan the government wants to ensure that any village in England has the freedom to expand in an incremental way, subject to local agreement. In addition to carrying out the review of planning constraints in rural areas mentioned above, the government stated it would:

“Ensure local authorities put local plans in place for housing according to agreed deadlines and require them to plan proactively for the delivery of Starter Homes… bringing forward proposals to speed up the process of implementing or amending a plan.

Help villages to thrive by making it easier for them to establish a neighbourhood plan and allocate land for new homes, including through the use of rural exception sites to deliver Starter Homes”.

The Housing and Planning Act 2016 which came into force in April 2016, has legislated for the construction of Starter Homes” which will be offered at a 20% discount for first-time buyers under the age of 40.

The government has further promised to review the current threshold for agricultural buildings to convert to residential buildings.

Conclusion

The conversion of agricultural buildings for residential use and the construction of housing thereby creating small residential developments does make economic sense, especially on sites no longer suitable to be used for agricultural purposes. However, it is early days and Sawbridgeworth illustrates that it may be some time before all organisations fully understand and embrace the ever-changing landscape of rural planning law and policy.