Author: Glenn

For companies selling shares, the Substantial Shareholdings Exemption (SSE) can mean significant tax relief. Introduced in 2002 and simplified in 2017, this exemption allows qualifying gains on share disposals to go untaxed—provided key conditions are met.

The SSE regime provides that a gain on a disposal by a company of shares (or an interest in shares, or certain assets related to shares) will not normally be a chargeable gain. This is provided the following two conditions are met for disposals on or after 1 April 2017. 

1. The ‘investing company’ must have held shares in the ‘investee company’ in such number, and for such time, that the shareholding satisfies ‘the substantial shareholding requirement’.
2. The ‘investee company requirement’ must meet similar ‘trading’ conditions. An exception to this condition was introduced for investments held through an investor company which is itself owned by qualifying institutional investors (“QIIs”). Where 25% or more of the Ordinary Share Capital of the company holding the shares being disposed of is owned by QIIs, the investee company requirement does not apply to the disposal, leaving only the substantial shareholding requirement. 

However, the exemption does not apply if:

• the disposal is a no gain/no loss disposal, or
• the gain would not have been a chargeable gain because of some other provision, or
• the gain arises to an insurance company on a certain type of deemed disposal, or
• should an anti-avoidance rule apply.

No formal claim is needed. If the conditions for the relief are met, the gain is automatically exempt. However, a loss on a disposal where the conditions for the relief are met is not an allowable loss.

Intellectual property (IP) refers to creations of the mind, such as inventions, literary works, designs, brand names, and artistic outputs. Whether you are a business owner, inventor, writer, or entrepreneur, protecting your intellectual property is essential for several compelling reasons.

Encourages Innovation and Creativity
Protecting IP incentivises individuals and businesses to invest in creating something new. Without IP protection, others could freely copy or reproduce a creator's hard work without consent, undermining the effort and resources invested. By offering legal rights such as patents, trademarks, and copyrights, innovators can enjoy a competitive edge, encouraging further investment in research and development.

Safeguards Revenue Streams
IP often becomes a valuable asset that can generate income. Businesses can licence their IP to others, sell their rights, or directly benefit from exclusive use. For example, an author can earn royalties from book sales, while a tech company can monetise patents for its software. Without protection, competitors could undercut pricing by copying the product, stripping away potential revenue.

Builds Brand Identity and Consumer Trust
Trademarks, logos, and brand names play a huge role in distinguishing businesses from one another. When customers see a trusted brand's logo, they associate it with quality and reliability. Protecting trademarks ensures no one else can use similar branding to mislead customers. Without this protection, businesses risk losing their reputation and consumer trust.

Provides Legal Recourse
Registering your IP grants you legal rights to act against anyone using your work without permission. Whether it’s unauthorised copying of a design or misuse of a trademark, IP protection allows you to seek remedies, such as damages or an injunction to stop further infringement.

Adds Business Value
IP contributes to the overall value of a business, often representing a significant share of its assets. Strong IP rights can make a business more attractive to investors or buyers because they provide a competitive advantage and predictable revenue. Startups, for example, frequently leverage IP as a selling point when securing funding.

Promotes Economic Growth
On a larger scale, protecting IP fuels economic growth by encouraging innovation and job creation. Industries such as technology, pharmaceuticals, and entertainment rely heavily on IP rights to thrive. By protecting ideas, society benefits from a continuous flow of new inventions, products, and creative works.

In summary, protecting intellectual property is vital for fostering innovation, safeguarding financial interests, and building strong businesses. It provides creators with the recognition, reward, and rights they deserve, benefiting both individuals and the wider economy.

The UK government has announced significant reforms to enhance compensation for customers affected by water service failures. Under new regulations, water companies will be mandated to increase compensation payments for issues such as supply interruptions, sewer flooding, and low water pressure.

These changes mark the first substantial update to compensation rates since 2000. For instance, compensation for internal sewer flooding will rise from £1,000 to £2,000 or more, and payments for low water pressure will increase from £25 to £250. Additionally, compensation will now be compulsory for incidents like boil water notices and missed meter services, which previously did not warrant mandatory payments.

Environment Secretary Steve Reed emphasized that these measures aim to hold water companies accountable and ensure that customers receive fair compensation when services fall short. He stated, "We are clear that the public deserve better compensation when things go wrong, so I'm taking action to make sure that happens."

Consumer advocacy groups have welcomed the reforms. Mike Keil, Chief Executive of the Consumer Council for Water (CCW), noted that the increased payment levels and expanded scope for compensation would incentivize water companies to improve their services. He remarked, "The overhaul of these standards marks a step forward in improving consumer protection and repairing fractured trust in the water sector."

These reforms are part of a broader government initiative to overhaul the water sector, which includes stronger regulations and potential criminal liability for water company executives. The legislation is expected to come into force next year, following a public consultation that showed overwhelming support for the changes.

In addition to the increased compensation, water companies have recently been fined £157.6 million for failing to meet pollution targets, reflecting the government's commitment to enforcing higher standards in the industry.

Overall, these measures represent a significant step towards improving accountability and service quality within the UK's water sector, ensuring that customers are better compensated when things go wrong.

A restaurant in Middlesborough recently challenged a civil penalty notice of £15,000 issued by the Secretary of State for the Home Department under Section 15 of the Immigration Asylum and Nationality Act 2006 (IANA 2006) arguing that their employee was lawfully present in the UK and that they were not given the opportunity to mitigate the penalty.

However, the Court emphasised that the 2006 Act's purpose was to discourage illegal employment and that employers are responsible for conducting any necessary checks on employees' right to work, according to Section 15(3).

This judgement highlights the importance of employers carrying out right-to-work checks to avoid finding themselves in a similar situation. Ensure your employees have the right to work by using an identity service provider offering Identity Document Validation Technology (IDVT).

From April 2024, UK businesses can access enhanced R&D tax relief through the merged RDEC and new ERIS schemes. With generous deductions and credits for R&D-intensive projects, the schemes offer tailored support to fuel innovation and drive growth.

Research and Development (R&D) tax reliefs are designed to support UK companies engaged in innovative science and technology projects. As of April 2024, the R&D Expenditure Credit (RDEC) and the Small and Medium Enterprise (SME) Scheme were merged. The new R&D expenditure credit (RDEC) and enhanced R&D intensive support (ERIS) came into effect for accounting periods beginning on or after 1 April 2024. While the expenditure rules for both are the same, the calculation methods differ.

The merged RDEC scheme is a taxable expenditure credit available to eligible trading companies subject to UK Corporation Tax. Even if a company qualifies for the ERIS, it may choose to claim under the merged scheme instead, but both schemes cannot be claimed for the same expenditure.

Although the calculation and payment processes for the merged RDEC scheme are similar to the previous RDEC scheme, there are some key differences:

• Small profit-making and loss-making companies benefit from a lower rate of notional tax restriction.
• A more generous PAYE cap applies.

The merged RDEC scheme is subject to Corporation Tax, as it is considered trading income.

The ERIS scheme provides additional support for loss-making, R&D-intensive SMEs:

• They can deduct an extra 86% of their qualifying costs (in addition to the 100% deduction already included in their accounts), resulting in a total of 186% of qualifying costs being deductible when calculating their adjusted trading loss.
• They can also claim a payable tax credit, which is not taxable and can be worth up to 14.5% of the losses available for surrender.

There have also been significant changes regarding the availability of relief for overseas R&D activities, which are now more restricted.