There is so much change currently in the technology used in law and the financial market place that you would be forgiven for losing track.
This article highlights some of the legal changes that are coming into the UK business world in 2018 that you should take the time to understand and be prepared for.
Brexit and legal changes
Will it or won’t it happen? Is it to be good news or bad news for your business? Currently no one really has the answer and nobody can really plan for what lies ahead.
If you plan to develop your business in Europe what we suggest is that now might be good time to register a European trademark or explore a European wide Patent application. Presently this will cover all of the European countries in one application. We do not know if or how Brexit may affect this but this is one of the preparations you could contemplate at this early stage.
Investment and funding
This firm specialises in structuring businesses for sale, scale up and getting ready for investment and funding. We have seen no slowdown in the injection of capital, the creation and growth of companies or in those being sold. In fact, the end of 2017 has seen a healthy climate so it is evidently still very much a good commercial market with numerous funding options available from debt financing, bank loans, crowdfunding and equity shares to SEIS/ EIS tax structures.
Interest rates are still at an all-time low so cash is cheap and readily available to companies. The mission is for companies to set themselves apart from their competitors. Some financial advisors seem to be recommending longer term loans now to lock in these lower rates, given the risk of rising rates, but this is something to take advice upon.
A better EIS?
The Enterprise Investment Scheme (EIS) received a great endorsement this year in the Autumn Budget and the investment limits for technology and other ‘knowledge intensive’ sectors have been doubled. Despite concerns there were no significant detrimental changes to the tax relief. This relief continues to be extremely beneficial for legitimate qualifying business seeking investment.
Finally, it is hoped by Spring 2018 HMRC will commit to (and deliver) a 15 day turn around for companies applying for EIS Advance Assurance.
Remuneration of directors
On 3 November 2017, the Investment Association (IA) published their 2018 Principles of Remuneration (IA Principles). The main changes centre around discretions, bonuses, shareholder consultation, transparency and long-term incentive plans. The Principles provide for greater certainty on how decisions are made through a Remuneration policy, emphasise meaningful shareholder consultation by companies and accountability for remuneration committee chairs. Whilst not mandatory it is considered as good practice.
These changes will not come as any great surprise to most companies who already follow this route and have established the good practice and results that come from it.
Following the IA Principles will ensure that remuneration for senior executives and the relevant policies have increased transparency, while retaining flexibility for their industry and longer-term business strategy. This is more attractive for investors and shows employees the integrity of the business from within.
Tax Evasion legislation
New legislation came out this year but we anticipate that it is going to be in the new year that infringements start to transpire and potential prosecutions or fines are applied.
Lawyers and accountants, for example who are regulated, already follow extensive money laundering processes. However, this legislation is going to greatly affect all businesses in the U.K. and those that deal with U.K businesses.
The rules are designed to prevent people assisting or facilitating their clients or customers with tax evasion practices. It is very clear that you need carefully structured processes and policies in place, that terms are stringent with third parties and that staff are properly trained. It’s essential everyone understands the difference between tax avoidance and evasion and how this can be facilitated even unwittingly.
It is essential that business owners ensure that they understand the legislation and how it applies to them. Ultimately, they are going to be held personally liable for their staff should they breach these rules.
There has been a lot of conversation around this recently so I do not intend to go into great detail in this article. However a look ahead to 2018 would not be complete without reference to GDPR which comes into force in May 2018.
GDPR will impact on all businesses whether small or large, start-up or established, provider of services or goods.
It is fundamental that you are thinking about what data you hold, where you hold it, why you hold it and how you’re going to obtain express consent if required.
Immigration bank checks
This can impact on founders, directors and staff who are in the UK on a visa. It is reported that banks and building societies are set to carry out immigration checks on 70 million current accounts from January.
These immigration checks are being carried out under the Immigration Act 2016. It is to be carried out quarterly and the Home Office expects to identify 6,000 visa overstayers, failed asylum seekers and foreign national offenders facing deportation in the first year. If your director or any staff are here on a visa check it’s in date. As an employer you have the duty to ensure that your staff have the right to work in the U.K.
Gender pay gap reporting legislation will require large employers to publish their overall mean and median gender pay gaps from 2018. Under the new laws, employers will have to calculate their gender pay gap from April 2017 and publish the details by April 2018. This applies to all Companies with 250 or more staff. Companies which fall under the regime must publish the figures or face large fines
Employment Termination payments
Currently the first £30,000 for loss of Office or damages can be paid tax free upon terminating an employee.
Contractual notice if worked is taxable as is payment in lieu of notice if it is a contractual term.
Previously, if the company chose to pay you notice in lieu at its discretion this would fall within the tax free exemption. This is not the case in the new year! Any and all notice pay or its equivalent either worked, paid for garden leave or in lieu will be taxable.
This will impact settlement agreements with staff and your HR should be brought up to speed
Credit card and debit card fee
As of 13 January 2018, new rules will come into effect which will ban the ability of companies to add on surcharges for the use of credit or debit cards by customers. The new rules will apply to any UK company who sells to UK customers, but questions are being asked as to whether a UK company will mean a company registered in the UK or simply just have a presence in the UK? And, how will the new rules affect businesses?
This law is coming into effect as a result of an EU directive. This means the rules are being used across the EU, so companies registered in the EU will also be prevented from surcharging.
The new law will undoubtedly come as welcome news to the consumer, but the new changes will have an impact on businesses who will have to find other ways to cover the cost of the charges levied on them by the banks. Larger companies will probably feel the effect less, and will probably absorb the loss of surcharging but it is the smaller business who may feel the impact.
Businesses will need to decide whether to accept debit and credit card payment and what will make most commercial sense for them. On one hand, increasing prices is just one way of dealing with this change, but it could put off customers who are looking to be spending wisely. Another option for businesses will be to stop accepting card payment and offer alternative options of payment. Cash only payments or bank transfers may be the way forward, but on the other hand this could also be perceived as a backward move, as times have moved on from traditional payment methods. However, there are sometimes bank charges for cash payments that would have a further impact on smaller businesses.
Currently the UK has simply sought to adapt current legislation for emerging technologies. Given the speed at which technology is progressing it is quickly realising the need to implement a new regulatory framework for many of these areas.
For example, with Drones there is going to be competency tests for users, clarity on their use & a safety assessment. There are also proposals for automated barriers being created to protect no fly zones and high-risk areas such as prisons. In regard to automated cars there is an issue with who is liable and how they are liable which needs to be clarified.
Crypto currency is another emerging area which has intrigued the world over. Whilst it now attracts mainstream investors this market is open for abuse. The Financial Conduct Authority has issued guidance warning against initial coin offerings (ICO), given this is still a largely unregulated area. It is likely, however, that the government will look to shortly introduce strict regulations of cryptocurrencies and look further at ways to expand anti-money laundering and counter-terrorism laws in this area.
The government seems to realise that whilst you cannot slow technology it needs to be regulated, as privacy & safety needs to be protected, so that confidence is not lost. Next year expect to see much consultation & changes in regulations in these areas.
Whilst 2018 really looks to be dominated by companies getting ready for GDPR, and then presumably being inevitably sanctioned for breaches. This is by no means not the only change which UK business owners face. It is important for any business owner to be aware of the changes affecting their business and put in place suitable safeguards. Failing to be prepared is often costly in terms of money, resources and time.
Karen Holden is the Managing Director & Founder of A City Law Firm who practise both commercial law and litigation, having been admitted to the roll in 2005. If you require further advice or assistance, please do not hesitate to contact firstname.lastname@example.org
A City Law Firm Limited is a leading entrepreneurial law firm in the city of London, with a dynamic and diverse team of lawyers. It was awarded most innovative law firm, London 2016 and Business Law firm 2017. They specialise in start-up business law, the tech industry, IP and investment