News archive

“The Scottish Government has produced guidance to help support the involvement of GPs in adult protection.

This guidance is designed to ensure that GPs are part of local multi-agency arrangements for adult protection and thereby enabled to fulfil their statutory responsibilities under the Adult Support and Protection (Scotland) Act 2007.”

The guidance can be found on the OPG Scotland website which can be found here.

I have updated this blog as we now have updated “GERS” figures and the Scottish Labour party has published its interim “Devolution Commission” report.  Its findings are similar to the Liberal Democrat proposal.

Although the Scottish Conservatives now appear to be moving towards arguing for the devolving of further tax powers there is as as yet no firm proposal from them.

Listed below are the taxes, duties and charges that Westminster has so far refused to pass control to the Scottish Parliament.

In bold are the additional powers the Liberal Democrats are putting forward for devolving.  This information is from its “Home Rule Commission” published in October 2012.

In red are the additional powers the Scottish Labour party might argue for devolving.  I say “might” as its report is an “interim” report only.

The figures are mostly from the “Government Expenditure & Revenue Scotland 2011-12” (GERS).  The figures are included to give an idea as to the level of revenue produced by a particular tax and are a number of millions of pounds.

1. Full control over income tax including the underlying law dealing with reliefs etc (some additional powers but not complete control)  (similar proposal from Labour) 10,790
2. National insurance contributions  8,393
3. Corporation tax (assignation of revenue only)  2,976
4. North Sea revenue  10,573
5. Fuel duties  2,296
6. Capital gains tax (partial control only) (similar proposal from Labour) 246
7. Inheritance tax (to be devolved)  (possibly)  164
8. Other stamp duties – stamp duty and SDRT on shares (estimated)  276
9. Tobacco duties  1,129
10. Alcohol duties  (includes spirit, wine, beer and cider duties)  981
11. Betting and gaming duties  115
12. Air passenger duty (even though included in Calman) (not clear if to be completely devolved)  (similar proposal from Labour)  213
13. Insurance premium tax  251
14. Climate change levy  64
15. Aggregates levy (even though included in Calman) (not clear if to be completely devolved) (similar proposal from Labour)  52
16. Vehicle excise duty  (possibly)  475
17. Bank levy (estimate as no separate Scottish figure)  180
18. Licence fee receipts  325
19. Crown Estate revenue  (not clear if to be completely devolved) (if Scottish Parliament accepts UK Government terms)  10
20. VAT cannot be devolved but VAT revenue could be assigned  9,554

Taxes already devolved to be devolved under Scotland Act 2012

1. Income tax (still only partial control over tax bands and will cost Scottish Parliament millions of pounds a year to administer even if not used)  (estimated partial control over)  5,395
2. Council tax  1,987
3. Business rates  1,933
4. Stamp duty land tax (Scottish Parliament control by April 2015)  330
5. Landfill tax (Scottish Parliament control by April 2015)  97

The Scotland Act 2012 also does not resolve the imbalance between the amount the Scottish Parliament is responsible for spending and which it raises.  The Scotland Act 2012 only takes us to about a third.

“As a case study of the causes and consequences of the property crash in 2008, this litigation is probably as good as any.”  Lord Malcolm

Outer House case in which RBS sought payment of sums due under a personal guarantee granted by Mr O’Donnell and Mr MacDonald, the directors of Whinhill Developments Ltd which had been formed to purchase a potential development site at Stone Farm in Greenock. The directors argued that the guarantee had been induced by negligent misrepresentations made on behalf of RBS.

RBS and Whinhill entered a one year loan agreement in September 2007 whereby RBS would provide a loan of £1.65m to fund the purchase. Whinhill bought the site for about £1.5m and planned to obtain planning permission then sell the site to a builder or developer. Whinhill granted a standard security and floating charge in favour of RBS (the site being Whinhill’s only asset).  Whinhill were unable to repay the loan at its expiry in September 2008. The parties then agreed to refinance the loan facility with a new loan of £1.695m to be repaid by March 2011; the Whinhill directors providing a personal guarantee for the company’s liabilities to a maximum aggregate value of £300k.

Whinhill failed to repay the sums due after a default event occurred and RBS sought payment of the sums due under the guarantee in February 2011. Central to the case was the property crash in 2008 and the falling value of the property. The loan was originally advanced in mid-2007 on the strength of a market valuation of £3m. When the facility was refinanced in 2008, property values had “fallen off a cliff” and the credit division of RBS was enforcing a 70% loan to value ratio. However, Whinhill’s relationship director in RBS’s commercial banking division was keen to avoid the crystallisation of what may have been by then a worthless security. He received word from Ryden that the property could be valued at £2m which, with a personal guarantee from Whinhill’s directors, would allow the 70% loan to value ratio to be met.

On three separate occasions RBS told the directors that Ryden would or had re-valued the subjects at £2m. The directors had understood the revaluation could be relied on for lending and guarantee purposes and Lord Malcolm took the view that it was reasonable for them to do so. Shortly after the first occasion (but before the second), RBS’s relationship director received the updated valuation from Ryden by letter. However, the letter made it clear that the report was not suitable for, nor to be relied on by the bank, for lending purposes (it was also based on an assumption of increased development density which had not been discussed with the Whinhill directors). There was no evidence that the report had been sent to the Whinhill directors.

Lord Malcolm found that the RBS statements were material factors in the directors’ decision to grant the guarantee and that the guarantee would not have been granted if they had been aware of the true position. As a result, a reduction of the guarantee was granted.

Whether the Whinhill directors were also entitled to damages for their losses depended on whether the misrepresentations amounted to a breach of a duty of care owed to them. Lord Malcolm found that, in using the assurance given by Ryden before receipt of the report to help persuade the Whinhill directors to agree to the guarantee, the relationship director had to be taken as having assumed responsibility for its accuracy. He then came under an obligation of enquiry or disclosure if he subsequently received material which cast doubt on the information given to the directors. And thereafter, he had a duty not to repeat the misrepresentation. The relationship director had breached that duty and the Whinhill directors were entitled to damages for loss sustained as a consequence.

The full judgement is available from Scottish Courts here.

(See also Inner House decision here)

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

HMRC has published a consultation paper on amending the qualifying conditions for Community Amateur Sports Clubs for comments by 12 August 2013.

More on this can be found here.

Inner House case concerning Glasgow City Council’s liability for damage caused to an Indian restaurant on the ground floor of a tenement building following the Council’s demolition of the floors above.

The Council had carried out the demolition work under s13 of the Building Scotland Act 1959 and argued that they should be free of responsibility for the collapse as, after the works had been completed, they had written to the restaurant owners indicating that future maintenance of the structure would be their responsibility. However, in the Outer House, the temporary judge had found that, whilst the Council had initially acted under the 1959 Act, after it had made the decision to demolish part of the building, a relationship had been created between them and the neighbouring proprietors that gave rise to a common law duty of care. The Council had carried out the demolition without carrying out gable stabilisation works, without which, it knew would there would be a material risk of harm to people or property in the vicinity of the wall. There was no evidence of the restaurant owners having been advised that the exposed wall lacked stability and they were entitled to assume that the Council had carried out the demolition works in a manner that did not create a new structural instability. As a result, the Council was found to be in breach of its duty.

The Inner House dismissed the Council’s appeal, finding there to be no error in the temporary judge’s decision. The duty breached was not a breach of statutory duty nor a failure of duty of care in the manner in which the Council exercised their statutory discretion to carry out the works. Rather it was a purely operational duty arising after the decision to carry out the demolition works was made: i.e. a duty not to create a reasonably foreseeable risk of harm by reason of the way in which the Council carried out the works.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

Trustees of David Zetland Settlement v HMRC [2013] UKFTT 284 (TC)

The First-tier Tax Tribunal has denied inheritance tax business property relief on a block of office lettings owned and managed by a trust.  The main reason given was that a commercial letting is mainly an investment rather than a business even though many of the services provided were over and above what would normally be expected under a tenancy. 

The decision shows how difficult it is to persuade a tribunal that let property is not mainly the holding of an investment.  

The report from the First-tier Tax Tribunal can be found here. 

Let’s start with the incredible revelation that large multi-national companies put a great deal of effort into paying as little tax as possible.  The debate surrounding this issue is long overdue.  I am also glad to say that there has been some great commentary on this issue.

Examples include:  Ian Bell’s: “It’s not an accident Westminster’s financial system allows tax avoidance … it’s designed that way”.  His article from the Herald can be found here.

Joyce McMillan outlines the wider debate and criticises the focus at Westminster on benefit fraud rather than tax avoidance.  Her article from the Scotsman can be found here.

George Kerevan’s article titled: “Taxing questions for complicit governments” from the Scotsman can be found here.  This is from the article: “The current generation of highly profitable internet companies have taken (legitimate) transfer pricing to extraordinary new limits. Google manages to operate almost tax-free in the UK, France and Germany, despite generating more than £35 billion in revenues in all three countries.”

Alsion Rowatt writing in the Herald comments on the increasing evidence of multinational corporations’ tax avoidance and criticises the HMRC for not keeping up with the internet age.  This article can be found here.

And from the Guardian: “The bosses of some of Britain’s largest multinational corporations have urged David Cameron to stop moralising and rein in his rhetoric on tax avoidance.”  The article in full can be found here.

For an example as to how far some companies will go look no further than our utility companies.  More on this from the Telegraph can be found here.

To summarise.  Companies rarely consider “morality” when deciding how much tax to pay.  I use the word “decide” intentionally.  These companies after all have a duty to their shareholders.  The fact is that UK and international taxation law is full of holes and has always been.  The politicians know this.  The politicians have always known this.  In the so called good times this issue was simply ignored.  Is there an easy answer? Of course not.  Do the politicians desperately want to be seen to be doing something? Of course.  Is there a huge amount of hypocrisy around this issue?  Yes.  Do governments want inward investment?  Yes.  Will they offer tax breaks to achieve this?  Yes.  Is the headline rate of tax the only deciding factor for companies?  Of course not.  Is there a growing perception in the UK that the taxation favours certain sectors over others?  I believe so.  Is this debate going to continue?  I hope so.

Now to the fiscal powers debate and two stories on the Scottish Conservatives.  The headlines contain the phrases “under attack” and “under fire” and show how difficult a position Ruth Davidson is in.  It seems she is damned if she does, damned if she doesn’t.  The Scotsman article can be found here and the Herald article here.

The head of one of the UK’s largest quarries has accused tax collectors of “arrogant and high-handed behaviour” ahead of a case this week involving millions of pounds in unpaid aggregates levies.  Aggregates levy was of course one of the taxes recommended for devolving under Calman.  The article from the Scotsman can be found here.

Now to London.  Boris Johnson continues to argue that London should have the same fiscal powers as those available to the devolved parliaments in Scotland and Wales.  This is a debate that is going to run and run.  More on this can be found here.

HMRC has begun a campaign to make professional football managers and coaches regularise their tax position. It has forced the English Football Association to provide a list of its 3,300 registered coaches, and has written to them all warning that “we have received extensive data about coaches from sources in the football community”.  Presumably HMRC knows that football is played in Scotland as well.  More on this can be found here.

Now to Europe and another example of the increasing role it is playing in tax matters.  The European Commission will present a legislative proposal to require the EU-wide automatic exchange of all types of information on taxable incomes, including dividends, capital gains, salaries, directors’ fees, pensions, life insurance and rents, rather than just interest as now. It will be implemented by an amendment to the EU Directive on Administrative Cooperation which came into force in January.  More on this can be found here.

Now to the USA.  Criminal investigations by the Internal Revenue Service rose 9% to 5,125 in the last fiscal year.  The number of convictions has risen to 2,634 aided by a 93% conviction rate.   More on this can be found here.  I suspect the trend is similar in the UK.

Again from the USA and a story that will I am sure run and run.  The IRS has admitted that its staff gave special scrutiny to the tax-exempt status of organisations supporting the conservative Tea Party alliance during the 2012 presidential election campaign. The IRS says it was trying to distinguish between political organisations as such, and social welfare organisations that are not allowed to engage in political campaigning as their primary activity.  US President Obama has now sacked the Head of the IRS, Steven Miller and the FBI has launched a criminal investigation into the affair.  Two articles on this from the Wall Street Journal can be found here and here.

And finally to France.  The French Government has dropped plans for corporate governance legislation to cap executive pay. Instead the 2014 Budget will introduce the long-threatened 75% levy on employers who pay salaries over €1m.   More on this from Reuters can be found here.

Have a great weekend.

English Court of Appeal case concerning leases of commercial premises at 104 Cromer Street and at 106/108 Cromer Street in London. The subjects in both leases included the ground and basement premises but not the upper floors (which consisted of residential flats retained by the Landlord) nor the soil pipes on the rear wall of the building which served the upper floors.

The leases contained an obligation on the tenant to put and keep the subjects in good and substantial repair, decoration and condition. There was no corresponding obligation on the landlord to repair the parts of the building it had retained; the landlord’s only express obligations being in relation to insurance (of both the premises and the retained subjects) and allowing the tenant quiet enjoyment of the premises.  A cesser of rent clause (i.e. ceasing liability for rent) also applied in the event the premises (or any part of them) were unfit for occupation and use.

The premises were damaged on at least 4 occasions between April 2004 and June 2005 by water and sewerage coming from the parts of the property retained by the landlord. The damage was repaired and insurance payments made. The tenant continued to pay the rent until June 2008 then stopped. The landlord took steps to forfeit the leases and re-enter the premises. The tenant argued that, as she had continued to pay the rent during the period in 2005 when the premises had been (in the tenant’s opinion) unfit for use, she was entitled to set that off against the rent due in 2008. The tenant also sought substantial damages for financial losses (including loss of business) arising from the leaks.

In order to succeed in such a claim the tenants had to establish a breach of duty on the part of the landlord in either contract or in delict arising from the various leaks. The basis of such liability was said to be either an implied obligation to keep the retained parts in repair or alternatively a common law duty as adjoining occupier to remedy any defect in those premises which was capable of causing damage to the leased subjects.

The Court of Appeal found that there was no reason to require the implication of an obligation on the landlord to keep the retained subjects in good repair. Although there was no express repairing obligation imposed on the landlord, the repair of the structure of the building was catered for through the provisions of the insurance clause. In the face of these provisions there was no reason based on necessity or business efficacy to alter the balance of the scheme by imposing an implied obligation to repair on the landlord, let alone one (as was argued for by the tenant) under which his liability to repair was absolute.

For much the same reasons, the existence of what the parties obviously intended should be a comprehensive scheme for the repair of both the leased subjects and the retained parts of the building was sufficient to exclude any liability in delict to which the landlord might otherwise be subject to in relation to the retained premises.

The full judgement is available from BAILII here*.

*We believe that the tenant disputes the facts as reported in the judgment (see here) and is appealing the case to the Supreme Court.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

The taxpayer’s success in the case of Joseph Nicholas Hanson has been confirmed by the Upper Tax Tribunal. It echoed the lower tribunal’s view that ‒ contrary to HMRC guidance ‒ the ownership of a farmhouse does not affect its entitlement to agricultural property relief from inheritance tax. The only relevant question is who occupies the house.

My earlier blog on this can be found here.

The decision from the Upper Tax Tribunal can be found here.

Outer House case considering the consequences of a judicial rectification of a lease. Mr Mirza was the landlord and Mrs Salim the tenant under a 25 year lease of a shop and yard in Glasgow. Mr Mirza built a shop on the yard. A dispute arose as to who had a real right in the yard and Mrs Salim sought and obtained an interim interdict preventing Mr Mirza from entering the yard and operating the shop in February 2008. However, in August 2009 the Court found that the yard had been included in the lease as the result of a conveyancing error (for which neither of the parties were responsible) and granted a judicial rectification[1] of the lease removing the yard from the leased subjects (the rectification being retrospective in effect). Mr Mirza then sought damages for wrongful interdict.

Mr Mirza’s action was dismissed. After considering the authorities on damages for wrongful interdict, Lord Woolman reached the following conclusions:

1. interim interdict is obtained periculo petentis (at the risk of the perpetrator);
2. the award of damages, however, depends upon an assessment of the whole circumstances of the case;
3. damages will be awarded if the interim interdict is nimious or groundless;
4. a false statement made by the person obtaining the order is likely to fall into that category;
5. a person who obtains a possessory judgment that was lawful at the time or pronouncement will not be liable in damages; and
6. it is not necessary for a pursuer to aver malice or ill will.

Lord Woolman found that, in this case, Mrs Salim had not acted in a way that was “nimious or groundless”. At the time of the action she had had a sure foundation to seek the interdict and in doing so, she had vindicated her right to exclusive possession. Lord Woolman held “that it would be a strong thing” to subject Mrs Mirza to damages taking the view that; “rectification altered the deed and the register, but it did not airbrush history. It did not convert a rightful interdict into a wrongful one”.

The full judgement is available from Scottish Courts here.

(See appeal to the Inner House here.)

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.