Wage slip-ups: employers beware

When I look back at my time as a Saturday girl at Reiss during University, I remember with fondness the substantial discount I got from their latest ranges. In return, I had to wear their clothes to work, but that was no hardship; I was now the best dressed student on campus.

It was the same for most of my friends who spent their weekends and Thursday nights working in retail – half price clothes so long as you wore them to work. And as we would collect our monthly wage slip showing a measly sum, we would give no thought about the accuracy of how that figure was reached.

"But it turns out that some of us should have paid a bit more attention to that slip." 

HM Revenue and Customs (HMRC) have recently published a report listing 115 companies in the UK who have been caught unintentionally failing to pay the national minimum wage (NMW) to their staff. 

Top of that list was the fashion retailer, Monsoon. Their policy of offering staff discounted clothes to wear for work meant that the cost was taken from their wages, taking employees below the legal threshold. From 1 October 2015 the NMW rose to £6.70 an hour for workers aged 21 and over; because wages to Monsoon staff dipped below this, the company now owes £104,508 to 1,438 workers.

"While this appears to be a genuine mistake, it is incidents like these that will not only leave the employer with a whooping bill to pay but can also cause some serious reputational damage." 

No-one wants to work for a company that doesn’t pay their staff properly, and people may not want to shop at a store that appears to be exploiting their lowly paid employees, regardless of whether it was intentional or not.

And it isn’t just fashion retailers that need to be aware. Unintentional deductions were found from other expenditure associated to the job, such as safety equipment and tools, and for meals or transport provided by the employer. As such, hair dressers, car repair shops and even a riding centre for disabled people were caught up in HMRC’s latest swoop.

To avoid mistakes like this in the future, employers should carry out a review of their staff uniform policies and benefit packages to make sure that staff are paid at least the minimum wage after these deductions. Employees also need to be aware of the new NMW for over 25s - the so-called “national living wage” - due to be implemented in April, which will see the lowest wages rise to £7.20 an hour.

It’s also advisable for employees to look at their wage slip each month and give real consideration to the breakdown of monies going into their account. 

"The Trades Union Congress estimates that at least 250,000 workers are being underpaid but that only a quarter of offenders are being caught." 

What may appear to be a perk of the job might actually be a breach of the law and employees on the lowest wages need to make sure this is not happening to them.

Posted by Elizabeth Maxwell, trainee in the employment practice group.

Elizabeth graduated from Royal Holloway, University of London in 2008 with a degree in History and Politics. She went on to study the GDL at BPP London (Waterloo) and the LPC at the University of Law (Bloomsbury), before joining B P Collins in August 2014.

Foreign property: post-death pitfalls

One of the things that I have most enjoyed about my seat in the firm’s private client practice group is the wide variety of work that we do.  During my seat, I have prepared Wills and Lasting Powers of Attorney for clients, made deputyship applications on behalf of clients who have lost capacity and assisted with the creation and administration of family trusts. 

In addition, the firm frequently advises executors that are dealing with a relative’s estate and can also act as executor itself when relatives are unable to undertake what can be an onerous responsibility. Recently I have been assisting in the administration of the estate of a Polish man, who I will call “Mark”.

Mark had lived in this country for many years, but still had property in Poland. 

“Foreign property is something we come across surprisingly regularly when dealing with estates.”

This is sometimes because the deceased previously lived in another country, or sometimes because the deceased owned a holiday home in, say, France or Spain.  

Many of the principles governing the succession of European property have changed recently as a result of the European Succession Regulation, which came into force on 17 August 2015.

The UK, Ireland and Denmark have not signed up to the Regulation but all other EU countries (including Poland) have and so it will affect English testators with property in Europe.  The Regulations do not apply to Mark’s estate (he died in May 2015), but I will nevertheless discuss the likely impact of the regulations in the future.

Mark’s Polish property threw up three particular legal issues that we had to consider. 

“First, was Mark’s English Will valid in Poland?"  

Mark had one English Will, which dealt with both his English and his Polish property.  Fortunately, the answer was yes; Polish law accepts a Will that is validly made in England.  The position would be the same if the European Succession Regulation applied, as the Regulation states that a Will is valid as long as it is valid in the country where it was made.

If the country where the property is located is outside of the EU, it will often be more sensible to have a second Will to cover the foreign property, to ensure that the Will complies with local requirements.  Even if the property is in the EU, it will often be easier to have a foreign Will.  A local official in Spain or Poland may not have encountered an English Will before, which may make dealing with and selling the foreign property more difficult.

“Second, did English or Polish succession law apply?” 

While in England a testator can (within limits) leave his property to whoever he chooses, this is not the case in some other countries.  For example in France, a testator is obliged to leave a certain proportion of his property to each of his children and to his spouse- regardless of whether the testator was English and lived in England.If the property is subject to French succession law, it must be left to spouse and children in the appropriate proportions.

Under English law, the usual position is that real property (generally land and buildings) passes under the succession laws of the country in which it is located.  As a result, Mark’s property in Poland will pass under Polish law. 

Matters would have been more complicated if Mark had died on or after 17 August 2015.  In contrast to the English law default position, under the European Succession Regulation (which binds Poland), property generally passes under the succession law of the country in which the deceased was habitually resident (in this case, England).  However, despite the apparent incompatibility between English and Polish law, the European Succession Regulation is likely to allow England to shift responsibility back to Poland, so that Polish succession law would still apply to the property.

“Third, did the estate have to pay inheritance tax on the Polish property?”

In the UK, inheritance tax does not depend on the location of the property, but on the domicile of the deceased.  As Mark had lived in the UK for more than 17 of the past 20 tax years he was deemed to be domiciled in the UK for inheritance tax purposes.  As a result, the starting point was that his estate would pay inheritance tax on all of his assets, even the Polish property. 

In practice, double-taxation can often be avoided as the UK has treaties with a number of other countries (for example, the US, Ireland and France) to avoid being charged inheritance tax twice on the same assets.  Unfortunately, the UK does not have such a treaty with Poland.  In these circumstances, HMRC usually allows the executors to deduct a “credit” from the inheritance tax due on foreign property, equal to the tax due on the assets in the foreign country.

However, (predictably) the position is more complicated if Polish assets are involved.  This is because in Poland the person inheriting the assets (rather than the estate) is liable for any inheritance tax due and so the process of applying for a rebate from HMRC is more complex.

“My experience dealing with Mark’s estate highlighted the importance of planning in advance.”  

It is important for clients who own foreign property to think about the implications after their death.  While nobody likes to consider their own mortality, many problems which crop up after death can be avoided by simple planning beforehand.

Posted by Elisabeth Kynaston, trainee in the private client practice group.

Elisabeth Kynaston started her training contract with B P Collins in February 2014, having previously worked at a legal publishing company and a legal advice centre in East London. She graduated from Durham University with a first class honours degree in Ancient, Medieval and Modern History. Elisabeth has completed the Graduate Diploma in Law and Legal Practice Course at the University of Law, Bloomsbury, both with distinction.

As the saying goes - time flies...

After two years of being a trainee, I’ve finally qualified as a solicitor! It's the perfect time to reflect on my training contract here at B P Collins and give an insight into my experiences.

When I started in September 2013, I was repeatedly told that two years would “fly by”. I didn’t think it would, as two years sounds like a long time. But like anything, whether it’s three years at university or a Man v Food-style eating challenge, we have a tendency to split big tasks into manageable chunks. And with a training contract, moving to new practice groups every few months can feel like you’re starting a new job each time.

Each practice group has new work, new colleagues, new clients and different ways of doing things. Some are open plan, others individual offices. Far from daunting, I found this really refreshing.

“When you think of a training contract as five seats, rather than two years, it really does fly by.”

I can never say I got bored or even too comfortable, and I was always kept on my toes (Michael Jackson would have been proud).

Let's start at the beginning as a fresh-faced trainee in my first seat - property. I very much enjoyed property; I actually think it should be a compulsory seat for trainee solicitors, whichever firm you're in. It's amazingly pervasive as property-related issues crop up in nearly every area of law.

My time in property was also the most eye-opening. I was thrown into the deep end as the practice group was very busy at the time, and I also had the benefit of returning for a second seat later in my contract.

Upon joining, I quickly grasped the nature of residential and commercial sales and purchases, working on commercial leases on behalf of both the tenant and landlord and all manner of Land Registry applications.

“In my view, property is the best example of working independently.”

Of course, assistance was always available whenever needed, but I enjoyed using my initiative to progress a transaction. There are excellent opportunities for client contact and you would often be a client's first port of call.   

Corporate and commercial (CoCom) was my second seat. I always enjoyed corporate work, having opted for the private acquisitions elective on the LPC and, back in May 2014, I wrote a blog about my seat in CoCom. I met fascinating business people and assisted in a wide range of transactions, including acting for a 3D modelling and printing company in its share sale, advising yacht and rowing clubs in their tax/charity statuses, and amending manufacturing and licensing agreements concerning a global film franchise.

If ever you want a great insight into the formation of companies, their regulatory requirements and how businesses run, then CoCom is an excellent seat to do so. I also saw the collaboration between solicitors in several practice groups working on a single corporate transaction.

I then went back to property for my third seat before completing my training contract with two seats in litigation and dispute resolution. My time here was split between property litigation and general civil litigation. By this time, I was seen as an 'experienced' trainee ("where's my walking stick?!") and therefore had a brilliant level of responsibility, often handling smaller pieces of litigation on my own or being given sole responsibility of a substantial task within larger, more complex proceedings.

In property litigation, I assisted the supervising fee earner in a claim at the First-Tier Tribunal of the Property Chamber involving leaseholders of 36 residential properties and our client as landlord/freeholder (which ties back into the importance of a seat in property!). In general litigation I had a hugely varied workload with, for example, contested probate claims, contractual disputes and unfair prejudice petitions.

It was general litigation where I decided to qualify and (luckily!) the practice group was able to keep me and fellow trainee Rebecca Mitchell as newly-qualified solicitors. Litigation seems to suit me.

“I enjoy assisting clients in resolving disputes they or their businesses may have, to try and think outside the box with the best solution you can find and the excitement of litigation's twists and turns.”

Your training contract, wherever it is, is likely to be career-defining. I learnt not to see it as a long journey to qualification, but to consider each seat as a new stage, or even a new job. Enjoy it while it lasts – it'll fly by.

Posted by Rajiv Malhotra, newly qualified associate in the litigation and dispute resolution practice group.

Having graduated with LLB (Hons) from the University of Birmingham before completing the LPC at BPP Law School, Rajiv completed his training contract with B P Collins. Upon qualification, he joined the litigation and dispute resolution team as an associate in September 2015.

Divorce and informal lending from family and friends

Having joined the firm in April as a paralegal, I am now undertaking my first seat with the family group. So far I have been involved in a number of interesting cases, ranging from complex high-net worth financial disputes to cases involving children arrangements. My tasks have been extremely varied and have included drafting documents and correspondence, putting together trial bundles, liaising with counsel and attendance at court. Each case has been as fascinating as the last, primarily due to the subtle nuances unique to each scenario and the engaging human aspect of working closely with clients. 

One issue that has come up on several occasions is how the family courts treat loans from family members and friends within financial remedy proceedings. It is common for family members or close friends to lend each other money on the basis of a verbal agreement and with little or no formalities in place. Of course, when life is running smoothly, this causes no problems. 

"But divorce can put such casual arrangements under the spotlight."

Getting divorced can involve two different sets of proceedings. First, divorce proceedings, which consist of a straightforward paper application to the court to bring the marriage to an end. Second, if the parties cannot agree between themselves, financial remedy proceedings to settle their financial affairs. 

Financial disclosure is part of the financial remedy proceedings. This involves comprehensively setting out a party’s financial circumstances, including income, assets and liabilities with supporting documentation such a bank statements, tax returns and payslips. This is so that the court can see what there is in the marital ‘pot’ to be divided. A loan falls within the category of liabilities to be disclosed. 

If the loan in question is a commercial loan, which is commonly referred to as a ‘hard loan’, the borrower will have a contractual obligation to repay it. It will be clearly documented by a loan agreement with the lender and it may be secured against an asset. The borrower will repay the loan according to the loan agreement, which will specify what interest will apply, when payments will be made and what will happen if repayments are not made. 

However, it is rare that monetary agreements within families are formalised in the same way. If one of the parties to the marriage borrows money from a family member, there is often no written evidence, a low or zero interest rate and a relaxed approach to repayment. This can mean that these loans are classed as ‘soft loans’. As a consequence, the court may treat the loan differently, such as construing it as a gift which does not need to be repaid, or that, even if repayment was intended, there would be no consequences if this was not effected or effected over a longer period than previously anticipated.

Talking about formalising money arrangements with family members is frequently seen as awkward and unnecessary. It is a rare parent who will ask for newlyweds to sign a loan agreement.

"However, it is important to be realistic and consider what life might throw at you."

If you are planning to loan money to a family member, it is a good idea to have a loan agreement signed by both parties which details the terms of the loan, including the fact it is to be repaid. There is also the option of securing the money against, for example, a property or another valuable asset. Such steps may jar the fluidity of family life, but could prove crucial protection in the event of a subsequent divorce. 

Posted by Katherine Yu, trainee in the family practice group.

Katherine started her training contract with B P Collins in May 2015, after joining the firm as a paralegal in April 2015. Katherine graduated from the University of St Andrews with a joint honours degree in International Relations and Modern History. She went on to study the Graduate Diploma in Law at the College of Law and the Legal Practice Course at BPP in Holborn.

Workplace stress as a disability

In my role as a trainee of the employment group, I recently attended a seminar at barristers’ chambers in London on the topic of “Stress as a Disability” within the workplace. The seminar explored employers’ responsibilities towards employees experiencing stress, which can be considered a disability under the Equality Act 2010.

Under the Act, an employee has a disability if they: 

(1) have a physical or mental impairment that,
(2) has a substantial and long-term adverse effect on their ability to carry out normal day-to-day activities. 

To be considered as “long term”, the effect on the employee’s ability to carry out normal day-to-day activities must have already lasted 12 months, or be such that it will last for at least 12 months.

Stress conditions can therefore amount to “mental impairments” if they cause long-term symptoms affecting an employee’s daily life; for example, low mood, anxiety, inability to sleep, loss of appetite or inability to concentrate. 

What makes it more difficult for employers is that an employee does not need to have been diagnosed with a specific medical condition such as depression or anxiety to be “disabled” for these purposes; in some cases, it will be sufficient for the employee merely to alert their manager to some of the symptoms mentioned.

Of course, most employers want to ensure that their workforce is happy and healthy.  They also usually recognise that providing support to an employee with stress-related symptoms can prevent their condition from deteriorating (which, in turn, could help prevent that person taking a long period of sick leave and the employer having to organise cover for their role). 

"But do employers really need to go out of their way to assist employees complaining of stress?  The short answer, as you may have guessed, is yes."

Employers have a duty to make “reasonable adjustments” for employees suffering from a stress condition that could amount to a disability.  This could include reducing the employee’s workload, responsibilities and/or hours, transferring them to a different position or department, and offering them counselling.

Employers that fail to make reasonable adjustments could find themselves facing discrimination claims from disgruntled current or ex-employees.  Even worse is that compensation for discrimination claims (unlike claims for unfair dismissal) are uncapped – so employers found liable could be forced to make big pay-outs.

However, using the criteria set out in the Equality Act 2010, it can be difficult for employers to determine whether an employee complaining of stress does in fact have a disability and, if so, what steps should be taken to handle the situation effectively.  

"This is where the employment practice group comes in."

While the group does, of course, act for employers (and, indeed, employees) in discrimination claims, a large part of its work involves advising employers on day-to-day employment law matters and, in particular, how to avoid potential claims. 

So, for example, a client’s HR manager might contact us for advice about managing the return of an employee that has been signed off work for stress.  Depending on the circumstances, we might advise them to:

(1) get an assessment of the individual’s health from an Occupational Health professional; and/or
(2) arrange a return to work meeting with the employee to discuss matters including likely triggers of stress and formulate a return to work plan; and/or
(3) carry out an ongoing risk assessment of the employee.

An alternative scenario might be a client asking us for more general advice about dealing with stress in the workplace, in which case we could suggest that they introduce training to help managers identify symptoms in employees and respond appropriately. 

We could also offer to review the company’s policies, such as its sickness absence management policy, to ensure that the correct procedures are in place to deal with such situations.

Attending the seminar was a valuable experience and highlighted to me some of the specific skills that an employment lawyer must have; in particular the ability to respond to frequent changes in legislation and case law, to think creatively to assist employer clients and pre-empt potential claims as well as dealing with existing ones, and to make tactical considerations in connection with such claims.

Posted by Elisabeth Kynaston, trainee in the employment practice group.

Elisabeth Kynaston started her training contract with B P Collins in February 2014, having previously worked at a legal publishing company and a legal advice centre in East London. She graduated from Durham University with a first class honours degree in Ancient, Medieval and Modern History. Elisabeth has completed the Graduate Diploma in Law and Legal Practice Course at the University of Law, Bloomsbury, both with distinction.

Deeds of Variation – a taxing issue

A quick glance at the daily newspapers and tuning in to radio call-ins and it is clear that the upcoming events in May are grabbing the media's attention. People are expressing their opinions as to who they think will win and who the big losers will be; how money could be better spent and whether current leaders should be replaced come the end of May. With not only the Premier League looking like it will culminate in another epic battle, but the FA Cup Final also taking place (which deserves a mention if only for my beloved Reading being within touching distance of gracing the occasion with their presence), May is on a lot of people's minds.

But moving away from issues in the sporting world, there is an even more significant event happening this May – even more important than the ten-strong B P Collins team tackling the London West Tough Mudder event, which is taking place in the name of supporting the mental health charity Mind. Yes, I am of course referring to the general election taking place on May 7, when millions of people will mark their ballot papers to vote for who they want to represent their constituency in Parliament.

In the run up to this, the Chancellor’s annual Budget was announced recently, whereby George Osborne set out the Government's intended spending plans.

Here in the private client practice, I was delegated the task of being on 'Budget Watch' to identify any news which would affect our working practices and the advice that we provide to clients, so that it could be posted on to our various social media channels for clients to be kept informed.

Amongst the introduction of the Personal Savings Allowance (which allows the first £1,000 interest an individual receives from their savings in a tax year to be tax free) and the Help to Buy ISAs for first-time buyers, the issue announced by the Chancellor of the Exchequer which caught our attention was that the use of Deeds of Variation is to be reviewed, and a report to be completed by the Autumn.

Whether this is just a political ploy used to undermine Labour leader Ed Miliband – as he and his brother David were alleged to have used a Deed of Variation with their mother Marion to vary the terms of their father’s will, so as to move ownership of a proportion of the family home into Ed and David's names – or not, will come to light in due course.

Tax avoidance has been a topic which the media have devoted many column inches to over the last few years, no less so than throughout the recent scandal involving HSBC. The announcement in the Budget to review Deeds of Variation may be a technique used by the Government to show the public that they are serious about tackling tax avoidance and that these instruments are one means for the wealthy to avoid tax.

Nevertheless, it should be remembered that these are useful documents which can help families re-distribute an estate so that it is as tax efficient as possible. 

In my first month in the practice group, I was asked to draft a Deed of Variation for an elderly client who was receiving an inheritance from their sibling, but as they had a sizeable estate already, they wanted to vary the sibling's will so that the inheritance was divided equally between their four children instead. This was opposed to the client gifting the money to the children directly; as such gifts are classified as 'Potentially Exempt Transfers' or 'PETs', and are included in an individual's death estate if made less than seven years before death. As inheritance tax was payable on the sibling's estate anyway, the use of the Deed of Variation meant that double taxation was avoided.

There are of course strict requirements that the Deeds of Variation must comply with in order to be held valid. Firstly, they must be created within two years of the death of the relevant person; it must be in writing and be signed by all of the beneficiaries who are wishing to divert their inheritance.

There are a number of situations in which it is useful to consider having a Deed of Variation, including where an individual has been omitted from the deceased's Will, or their inheritance is not seen as adequate based on the value of the deceased's estate.

A Deed of Variation can also be used to reduce the rate of inheritance tax that applies against an estate by varying the Will so as to give 10% of the deceased's net estate to charity, which qualifies the estate for the 36% rate of tax as opposed to the 40% rate. Money going to a charity registered in the EU from a deceased's estate does not attract inheritance tax as they enjoy 'charity exemption'. Of course this will not be beneficial to all estates and therefore professional advice should be taken by the executors and beneficiaries.

If you have any queries regarding Deeds of Variation, or other issues regarding estate administration, or you wish to discuss estate planning measures that you can take in order to minimise the inheritance tax that your estate will incur, then please contact a member of our private client team.

So as May draws ever closer, all preparations and discussions become increasingly more heated and intense, both in and between the political parties ahead of the election, but also for the B P Collins' Tough Mudder team, with team members frantically preparing their training regimes. I know that, for me, my labrador Bertie is starting to lose his patience with my exercise regime infringing on his walks which have been replaced with runs, as he is perennially unable to pace himself and so ends up exhausted after 200 metres. Let's just hope that the political party leaders all pace themselves for the general election better than Bertie does.

Posted by Thomas Bird, trainee in the private client practice group.

Thomas Bird started his training contract with B P Collins in September 2013. He graduated with a first class honours in International Business in 2010 before completing a Masters in Law at the University of Sheffield, attaining a commendation. Thomas worked as a paralegal within the Litigation and Dispute Resolution team for 3 months in 2012 and also gained legal experience at a well-respected firm in Leeds in 2011.