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JUNE 2008 |
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This material will shortly be available at our web-site (www.russell-cooke.co.uk) together with an archive of past updates. Topics this month: PROPERTY – TAX EFFECTIVE DONATIONS TO CHARITIES
PROPERTY – TAX EFFECTIVE DONATIONS TO CHARITIESDonors can secure tax relief on gifts to Charities of land and buildings. Tax relief is available where a donor gives or sells, at less than market value, a qualifying investment to a UK Charity. There are a number of qualifying investments including the whole of a beneficial interest in a qualifying interest in land and buildings. A qualifying interest in land means:
To qualify for the relief the general rule is that the donor must dispose of the whole of its beneficial interest in the land in question to the Charity. The grant of a leasehold interest for a term of years absolute is, for the purpose of securing tax relief, treated as a disposal of the whole of the donors beneficial interest. At a time when property owners may have surplus unoccupied property, it may be appropriate for them to consider a tax effective donation. HM Revenue & Customs seems willing to accept that a lease of at least one year will be considered a qualifying interest. An additional benefit for donors will be the fact that they will not be liable to pay business rates for the land donated. The liability for business rates will be the responsibility of the charity as occupier. If property is used wholly or mainly for charitable purposes or the institution occupying it is established for exclusively charitable purposes the charity will be entitled to 80% mandatory relief from business rates and can apply for discretionary relief in respect of the remainder, as discussed in our April update.
Empty property vested in UK Charities will still qualify for relief where the intended next occupant is a charity.
The donor will need to deduct any disposal proceeds or other money or the value of other benefits the donor or a person connected with the donor (such as a relative or connected company) receives as a result of the donor giving or selling the qualifying investment to a Charity. The value of the net benefit to the Charity is normally the market value of the qualifying interest. This will not necessarily be the same as the amount of rent forgone for the term of the lease, but rather the value of that lease on assignment taking into account its terms, including, for example, obligations with regard to repair and any tenant break clauses . The relief can be claimed, in the case of an individual at the time when they calculate their income for the tax year in which they make the gift. Companies can deduct the relief as a charge on income for the accounting period in which they make the gift. In the case of gifts of land to Charity it is possible to secure confirmation from the Inland Revenue that they agree the value of the gift before relief is claimed. The donor will, however, need to procure an appropriate valuation from a surveyor or other person capable of making a justifiable assessment. For further information, please contact:
EMPLOYMENT – SELF EMPLOYMENTProblems with self-employment The risks of confusing self-employment with employment are of course two fold: the risk of unfair dismissal claims and the risk of tax liability for undeducted PAYE and National Insurance. Following the case of Demibourne Ltd v HMRC it was found that an employer was liable in full to HMRC for Income Tax and National Insurance contributions on 10 years of an employee’s earnings in circumstances where the parties had wrongly believed the individual to be self-employed and HMRC was not obliged to give credit for the tax the individual had already paid on a self-employed basis. The Income Tax (PAYE) Regulations 2008 introduced in April 2008 include the power for HMRC to transfer PAYE liability from an employer to an employee to avoid double recovery. For further information, please contact:
GOVERNANCE / INTELLECTUAL PROPERTY – COPYRIGHTYou may not be getting ownership of copyright you believe you have paid for It is a common misconception that if you pay a designer, architect, IT consultant or other external provider for a service which embodies copyrightable material, that you will own the copyright in that material after you have paid the fee. In fact, while copyright material produced by employees is generally owned by the employer, in most cases that produced by third party consultants will not become your property even if you have paid for it. The basic legal position is that the creator of the copyright material will retain ownership of it and you will simply get a licence to use it for the particular project you have paid for. A good example of this is where you commission an architect to produce drawings of a new extension. Here, both under basic legal rules and the RIBA standard form agreements, the architect retains ownership of the copyright and you have only a licence to copy and use it. That copy or use may not allow you to further extend the property unless a further fee is paid. Similar situations arise where an IT consultant develops or extends your organisation’s IT system and this includes the writing of a software programme, or where a designer writes or sets out your annual report. In either case the consultant may claim a further fee if you re-use elements of their design and layout. This should be addressed in agreements with such suppliers by having appropriate terms to assign rights in the relevant copyright. Too many organisations accept the supplier’s standard terms without checking this issue.
EVENTSProgramme of Evening Seminars 2008 The Employment Law Conference – Monday 6 October 2008 For more information or to register for the conference please contact Janev Djemil on 020 8394 6372. Janev.Djemil@russell-cooke.co.uk The Charity Team
This material does not give a full statement of the law. It is intended for guidance only, and is not a substitute for professional advice. No responsibility for loss occasioned as a result of any person acting or refraining from acting can be accepted by Russell-Cooke. Copyright: Russell-Cooke, June 2008 To subscribe to this monthly legal update please visit http://www.russell-cooke.co.uk/serv_charities_intro.htm and fill in the online request form, or send an email including your name and email to, charitylegalupdates@russell-cooke.co.uk An archive of past updates can be found at http://www.russell-cooke.co.uk/serv_charities_updates.htm If you would like to reproduce some or all of our updates in your own publication, contact KATE SLATTERY on 020 8394 6458, kate.slattery@russell-cooke.co.uk
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