Internet trader jailed for VAT fraud (HMRC)

29/11/2011 14:54

HM Revenue & Customs

Internet trader jailed for VAT fraud

A 40 year old man has been jailed for attempting to evade over £420,000 of Value Added Tax (VAT) due on goods sold online.

Gregory Allnutt from south east London was sentenced to 20 months imprisonment at Southwark Crown Court after an investigation by HM Revenue & Customs (HMRC).
Chris Martin, HMRC’s Assistant Director of Criminal Investigation said:
”Allnutt thought that by trading online he could avoid paying his taxes, but he has discovered that isn’t the case. Our successful investigation and today’s sentencing send a clear message to others involved in such crime that our investigators will identify and pursue you.
“Tax fraud costs millions of pounds in lost revenue in the UK each year, money that could be used to fund vital public services. Anyone with information about this type of crime, should call the Customs Hotline on 0800 59 5000 or email customs.hotline@hmrc.gsi.gov.uk.”
Allnutt’s home was raided by HMRC officers in June 2011. Evidence uncovered proved that from 1 September 2007 Allnutt used a VAT registration number to obtain zero rated goods from suppliers within the EU & then sold them on through another online company, failing to declare and pay the tax to HMRC.
Allnutt pleaded guilty to twelve counts of fraud on 1 November 2011 and was sentenced today.
In early 2012, HMRC will be launching a Campaign focused on those who are using e-marketplaces to buy and sell goods as a trade or business and who fail to pay the tax owed. Using the same techniques and sources employed to discover Allnutt’s trading activity, as well as others, HMRC has already begun the process of gathering what it needs to identify individuals and companies involved in this type of trade.
Confiscation proceedings are in place.
Notes
1. Gregory Allnutt, an internet trader of 30 Ellery Road, London SE19, pleaded guilty to twelve counts of being knowingly concerned in the fraudulent evasion of tax, contrary to section 72(1) of the Value Added Tax Act 1994.

2. He was sentenced to one year and eight months for each of the twelve counts to run concurrently at Southwark Crown Court today (29 November 2011).

3. Confiscation proceedings are in place.

© Crown Copyright 2010

Welsh sisters jailed for £161m VAT scam (HMRC)

30/11/2011 15:37

HM Revenue & Customs

Welsh sisters jailed for £161m VAT scam

Two sisters from Colwyn Bay, whose systematic frauds funded lavish lifestyles filled with luxury property, fast cars and private schooling, were jailed today after their greed led them to attempt a £161m fake VAT repayment scam.

The women’s dream was brought to a halt when HM Revenue & Customs (HMRC) launched an investigation into the employment agency the sisters claimed to be running. Enquiries led to their arrest in January 2009, and they were charged in December 2009 with nine offences including VAT and tax credits frauds. Today Andrea Vaughan Owen, 42, and her sister Roberta, 37, were each sentenced to 3½ years in jail.
Andrea, a former post office worker, and Roberta, who was once a civilian worker for North Wales Police, paid for private schooling for Andrea’s two eldest children, bought two properties, Mercedes sports cars, spa treatments and private health care.
The pair had no difficulty considering how they might spend their illicit wealth, making enquiries about buying a £320,000 Rolls Royce, various commercial properties worth in excess of £2m and even approached Liverpool Football Club to discuss an advertising deal. However, as their fraudulent attempts failed, maintaining this veneer of wealth based mainly on credit was increasingly difficult. As they became more desperate their attempts at fraud became more outrageous.
Speaking after sentencing today Simon De Kayne, Assistant Director, HMRC said:
“Andrea and Roberta Vaughan Owen lived the type of lifestyle that most people can only dream about; a lifestyle funded by their web of deceit and fraud. The scale and variety of their criminal attempts was astonishing, but it wasn’t enough for them and their greed led to the £161m VAT claim, and their downfall. Our next step will be to relieve them of the profits of their crimes.
“Anyone tempted to cheat, swindle and defraud should be warned that we are examining claims more closely than ever before. During the first year of our error and fraud strategy, we have stopped more than £1bn of fraudulent and incorrect tax credits payments. We work closely with the Department for Work and Pensions, and carefully examine and check claims.”
During a three week trial Caernarfon Crown Court had heard how mum of three Andrea Vaughan Owen and her sister Roberta Vaughan Owen set about their frauds. Between them they received £120,000 in tax credits over a five year period, starting in 2003 when they made their first claim stating that they were employed. Investigations later revealed that Roberta had been on incapacity benefit since 2002, supposedly unable to work, despite telling HMRC that she was self employed. Andrea also claimed to be self employed working more than 30 hours per week.
Andrea also tried – and failed – to obtain two bridging loans totalling £751,000 by falsely claiming her income was £18-22k per month. Both sisters attempted insurance fraud by seeking out mortgage and motor vehicle repayments by claiming loss of earnings. Finally, they submitted a false VAT repayment claim for £161m in December 2008, which was not paid.
Sentencing the pair today at Caernarfon Crown Court, Judge His Honour Niclas Parry said “The Jury has seen you for what you are – serial fraudsters, shameless liars, manipulative and calculating. You lived a lavish, greedy lifestyle at the expense of people who face real hardship.”
Confiscation proceedings will follow.
Notes
1. Defendants’ details: Andrea Vaughan Owen, DOB 12/01/69 and Roberta Vaughan Owen, DOB 11/06/74 both of 7 Cwrt Bedw, Colwyn Bay, Conwy.
2. Andrea and Roberta Vaughan Owen had both denied all charges. Their trial commenced on 7 November 2011 at Caernarfon Crown Court.
3. At the time of their trial, Andrea and Roberta were full time students.
4. Summary of offences:
£161m VAT repayment attempt
Andrea Vaughan Owen and Roberta Vaughan Owen attempted a fraudulent £161m VAT repayment claim. Between 1 July 2008 and 12 January 2009 they set up VAT registered limited companies and attempted to obtain and create invoices in order to facilitate the false VAT repayment, which was submitted for payment in December 2008.
Andrea Vaughan Owen and Roberta Vaughan Owen were each sentenced to 3 ½ years in prison for this offence.

Tax credits fraud
Andrea Vaughan Owen received a total of £95,340.41 in tax credits she was not entitled to, by claiming that she was working and lying about childcare costs for her two eldest children between April 2003 and July 2008. During this period Andrea Vaughan Owen did not work.
Andrea Vaughan Owen was sentenced to 2 years in prison for this offence, to run concurrently.
Roberta Vaughan Owen received a total of £24,874.57 in tax credits she was not entitled to between April 2003 and July 2008, by claiming she was working when she was in fact in receipt of incapacity benefit.
Roberta Vaughan Owen was sentenced to 2 years in prison for this offence, to run concurrently.
Insurance claims
Andrea Vaughan Owen made false representations between 26 February and 15 July 2007 to Pinnacle Insurance Company Ltd, under a mortgage insurance policy for her property at 7 Cwrt Bedw, Colwyn Bay by claiming for loss of earnings, when she did not in fact work. This claim was ultimately unsuccessful.
Andrea Vaughan Owen and Roberta Vaughan Owen both made false representations to Pinnacle Insurance Company Ltd, under an insurance policy covering payments for two Mercedes Benz sports cars. Between 26 February and 15 July 2007 Andrea and Roberta both claimed for loss of earnings despite the fact they had not worked during the term of the policy. Their claims were unsuccessful.
Andrea Vaughan Owen and Roberta Vaughan Owen were both sentenced to 18 months in prison for this offence, to run concurrently.

Attempted bridging loans
In March 2008 Andrea Vaughan Owen made false representation about her income to Link Lending, with a view to obtaining a bridging loan of £572,400. Andrea claimed that her monthly income was in the region of £18-22k per month despite the fact that she was not working. This attempt was unsuccessful. She also made a similar, unsuccessful representation to the same company during the same month in an attempt to obtain a bridging loan of £179,280.
Andrea Vaughan Owen was sentenced to 18 months in prison for this offence, to run concurrently.

© Crown Copyright 2010

The Chancellor delivers his Autumn Statement 2011 (Grant Thornton LLP)

29 November 2011
The Chancellor delivers his
Autumn Statement 2011
Today’s Autumn Statement was a back to
basics affair, about building infrastructure
and stabilising the economy. There was a real
echo of the Thatcher years with the core of
the announcement centred on getting people
back into work and having a right to buy.

The mid-corporate market got a small boost
with 100% capital allowances in designated
enterprise zones, and the pledge to improve
lending support via the National Loan
Guarantee Scheme will also be welcomed by
those businesses looking to grow.

There was very little in the way of tax
announcements, so clearly the Government
is saving up any other tax incentives for 6
December when the 2012 Finance Bill is set
to be released in draft. Within this we hope
to hear about those non-domiciled in the UK
being encouraged to invest in UK companies,
a new statutory residence test and the
proposed changes to the controlled foreign
company rules.

R&D ‘above the line’ tax credit
for larger companies

The Chancellor has announced the
introduction of an ‘above the line’ tax credit,
to be introduced during 2013, to encourage
research and development (R&D) activity
by larger companies. The Government has
indicated that it will consult on the detail at
Budget 2012, and will ensure that small and
medium-sized enterprises (SMEs) are not
disadvantaged as a result of this change.
The Chancellor stated, “We have listened
to the ideas from business groups about
encouraging innovation in larger companies,
and we will introduce a new ‘above the line’
research and development tax credit in 2013
that will increase its visibility and generosity.”
This announcement builds on measures
announced at Budget 2011 to increase the
generosity and accessibility of R&D tax relief
for SMEs.
An ‘above the line’ tax credit will result
in a credit being taken against the company’s
corporation tax bill rather than an enhanced
deduction. The intention behind the credit is
to incentivise those making the investment
decisions in a company, and based on questions
asked in the previous consultation document
issued by the Treasury, it may also assist loss
making companies who do not currently get
any immediate benefit from the scheme.

It is the Government’s ambition to create
the most competitive tax system in the G20,
and following consultation over the summer,
the Government has indicated that it will
publish further details of its reform to the
R&D tax relief system on 6 December 2011.

Seed Enterprise Investment Scheme

Following Budget 2011, the Government
launched a consultation on how to provide
new support for seed investment in start-up
companies. The consultation considered
the introduction of a new tax relief scheme,
referred to as Business Angel Seed Investment
Scheme (BASIS). Grant Thornton’s response
to this consultation can be found here.
The Chancellor announced today that
the Government will introduce a new tax
advantaged venture capital scheme from April
2012 called the Seed Enterprise Investment
Scheme (SEIS), as a result of the consultation
on the proposed BASIS scheme, to encourage
investment in start-up companies.

Under the new scheme, individuals
can receive income tax relief at 50% of
the amount invested, up to a maximum
investment amount of £100,000 in each tax
year. The rate of income tax relief does not
depend on the rate at which the individual
pays income tax.
There will be a cumulative investment
limit of £150,000 for companies and
companies eligible for the scheme are limited
to those with total assets of below £200,000
before the SEIS investment.

Further details are expected to follow
with the publication of the draft legislation for
Finance Bill 2012 on Tuesday 6 December.
In addition to the income tax relief, there
will be a one year capital gains tax (CGT)
holiday on gains invested in the SEIS during
2012-13. Capital gains arising on disposals of
any chargeable asset during 2012-13, which
are invested in the SEIS in the same tax year,
will be exempt from CGT potentially capped
at £100,000 as per the income tax relief.

National Loan Guarantee Scheme

In an effort to encourage growth in the private
sector and to increase the flow of credit to
smaller businesses, the Chancellor announced
today that the Government is launching a
National Loan Guarantee Scheme.
It is hoped that the scheme will reduce the
cost of borrowing by up to one percentage
point for eligible businesses; those with a
turnover of up to £50 million. The scheme
will focus on new loans and overdrafts.
The Government is making £20
billion available over the next two years
for participating banks to lend to eligible
businesses under the scheme. The scheme will
operate through participating banks raising
cheaper finance under the Government
scheme. They must then pass the lower
borrowing costs onto businesses.
Eligible businesses can access funds
through the scheme by applying for credit
from participating banks as they would for
any normal loan. The scheme is subject to
state aid approval from the European Union.
Subject to receiving this approval, it will be
operational as soon as possible.

Enhanced capital allowances for
enterprise zones with two new
zones confirmed

The Government will make 100% capital
allowances available in the Black Country,
Humber, Liverpool, North Eastern,
Sheffield, and Tees Valley enterprise zones,
which the Government hopes will encourage
manufacturing and other industries into the
zones. These enhanced first year allowances
will be available for plant and machinery
investment incurred between April 2012 and
March 2017.
The Government will also approve
proposals from the Lancashire and Humber
Local Enterprise Partnerships to form
enterprise zones on and around the BAE
Systems’ sites in these areas.
The Chancellor stated “we will go
ahead with the 22 enterprise zones already
announced – plus two further zones in
Humber and Lancashire confirmed today.”
The Government will consider creating a
new enterprise zone at Battersea, following
the extension of the Northern line to the area
and the redevelopment of Battersea power
station. It will also consider, subject to due
diligence, expanding the existing enterprise
zone in the North East to include land
around the Port of Blyth, with the intention
of encouraging business investment in the
renewables industry and creating new private
sector jobs in the region.

What else can we expect?

In addition to the announcements made
in the 2011 Autumn statement, a number
of additional measures are also anticipated
to come into effect from April 2012.
Further details are expected to be released
subsequently, with draft legislation set to be
published on 6 December.
Be sure to check back to the Grant
Thornton website for further updates. In the
meantime, by way of a brief summary, here
are a few of the measures to look out for, all
of which are due to take effect from April
2012.
• It is anticipated that certain non-UK
domiciled but UK resident individuals
who elect to be taxed on the remittance
basis will be charged an increased rate of
£50,000 per annum.

• Measures to introduce a robust statutory
test for UK residency were consulted on
in the summer.

• In June 2011, HM Treasury issued a
consultation document on a new set of
controlled foreign company (CFC) rules,
that protect against artificial diversion
of profits from the UK to low tax
jurisdictions.

• In addition to the new announcements
regarding the enhanced Enterprise
Investment Scheme incentives (see
above), further changes to the regime are
expected.

• A new, lower rate of inheritance tax is
expected to be introduced for individuals
who choose to leave 10% of their estate
to charity when they die.
Interestingly, alongside the Autumn Statement,
the Government has released draft legislation
regarding restricting the tax rules with respect
to employer asset-backed contributions to
defined benefit registered pension schemes.
These new measures will take immediate effect
from 29 November 2011.

© 2011 Grant Thornton UK LLP. All rights reserved.
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Grant Thornton International and the member firms are not a worldwide partnership. Services are delivered by the member firms independently.
This publication has been prepared only as a guide. No responsibility can be accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material in this publication.
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Fake vodka gang jailed (HMRC)

25/11/2011 13:52

HM Revenue & Customs

Fake vodka gang jailed

Five men who masterminded a major counterfeit vodka manufacturing and bottling plant in Leicestershire, have today been sentenced to a total of 17 years and ten months. A sixth man will be sentenced on 5 December 2011.

The plot was uncovered in an unregulated and fire hazardous industrial unit by HM Revenue & Customs (HMRC) when they carried out raids in September 2009. They seized nine thousand bottles of fake vodka, branded as Glen’s, manufacturing equipment, bottles and counterfeit packaging – labels and cardboard boxes, at the remote industrial unit at Moscow Farm near Great Dalby, Leicestershire.
The court heard there was a complete lack of any fire safety measures in the unit posing a serious and life threatening hazard. The alcohol vapour alone could have triggered a major explosion if the lights had been switched on or a naked flame or cigarette had been lit.
Simon De Kayne, Assistant Director of Criminal Investigation for HMRC, said:
“This was a substantial production, bottling and distribution plant with the infrastructure to distribute large quantities of counterfeit Glen’s vodka throughout the country. But it was set up without any thought for the safety of those working there or in the area nearby.
“The gang were fully aware the counterfeit vodka they manufactured contained highly dangerous chemicals making it unfit for human consumption, but were interested only in making a profit at the expense of British taxpayers. The revenue loss to the Exchequer on this haul alone was £1.5 million.”
Upon sentencing His Honour Judge J Sampson said:
“This was fraud on an industrial scale. You set out to make as many bottles as humanly possible. If not discovered it would have gone on and the duty loss would have been unquantifiable.”
He added that there were five areas of concern: “The high loss to the taxpayer; the duping of the public; the danger to the public, particularly as bleach was added; the undermining of the genuine brand and danger to the workforce in the factory.”
He also asked for “the team and the investigators to be commended for all the hard work and hours of toil that went into this case.”
The bottles of vodka seized featured professionally printed labels, duty stamps and bottle tops – all of which were counterfeit. Analysis of a sample bottle showed raised levels of methanol. In high quantities methanol can pose health risks.
In addition over 25,000 litres of pure denatured alcohol (methylated spirits) was seized, enough to make around 100,000 bottles of vodka. Denatured alcohol is used as a solvent and contains hundreds of additives. It is coloured purple to distinguish it from drinkable alcohol and is not fit for human consumption. Bleach was used by the gang to remove the colouring to make it clear before diluting to the required strength.
Evidence showed that at least a further 165,000 bottles of fake vodka were manufactured at Moscow Farm during 2008 and 2009. They had been distributed to independent stores across the UK. HMRC officers had seized the same illicit vodka from shops in Salford, London and South Wales. Forensic analysis showed it was a positive match for the vodka seized at Moscow Farm.
Notes
1 All defendants were charged with Conspiracy to Cheat the Revenue.
2. Details of those sentenced today, 25 November 2011, at Hull Crown Court include:
• Kevin Eddishaw, (DOB 28.12.57), of 1 Handford Court, Southwell, Nottinghamshire, pleaded guilty* and was sentenced to seven years in prison.
Eddishaw was the principal gang member who masterminded the plot.
*He pleaded guilty after the jury had been sworn in. The Judge directed the jury to find Eddishaw guilty.
• John Mark Humphreys, (DOB 23.08.65), of 1 Main Street, Upton, Newark, Nottinghamshire, was found guilty and was sentenced to seven years in prison.
Humphreys was Eddishaw’s right hand man and lieutenant in the plot.
• James Fyfe, (DOB 21.05.60), of 4 Furlong Avenue, Arnold, Nottingham, pleaded guilty and was sentenced to sixteen months in prison.
Fyfe was the site foreman of Moscow Farm.
• Mark Timothy Gyles, (DOB 03.03.63), of 127 Belleville Drive, Nottingham, was found guilty and was sentenced to 12 months suspended for twelve months. He must also carry out 300 hours of unpaid work.
Gyles was one of the drivers transporting the goods.
• Michael James Matthews, (DOB 11.11.55), of 27 Stanley Grove, Weston Super Mare, Somerset, was found guilty and was sentenced to 18 months in prison.
Matthews was a printer who procured supplies of counterfeit labels and boxes.

Bray Engineering Limited (“Bray”) and MPH Engineering Limited (“MPH”), have been wound up in the High Court in London following an investigation by the Insolvency Service

24/11/2011 11:30

Insolvency Service

Car repair companies closed down after Insolvency Service investigation

Two companies, Bray Engineering Limited (“Bray”) and MPH Engineering Limited (“MPH”), have been wound up in the High Court in London following an investigation by Company Investigations, part of the Insolvency Service.

The companies, which are jointly owned, operated nationally using a number of trading styles and websites.
The investigation showed the companies vastly inflated the costs of the work they undertook. They also misled and intimidated their customers.
Both companies were originally based in Southall, Middlesex and more recently operated from Robinsons Farnell Warehouse, Isleworth, Middlesex.
The court heard that the companies effectively operated one business; that of engine reconditioning and repairs, and generated business via a number of websites, including:
http://www.reconditioned-engines.co.uk;
http://www.remanufactured-engines.co.uk
http://www.secondhandengines.co.uk
http://www.jaguarengines.co.uk and
http://www.rangeroverengines.co.uk
The Insolvency Service’s investigation discovered 429 customer complaints made against the companies within a three-year period, where customers had paid around £1.2m for parts and services which had either not been provided or were subject to dispute.
Commenting on the case, David Hill, a Case Supervisor with The Insolvency Service said:
“This is a very significant result and sends a clear message to crooks everywhere that unscrupulous trading methods will not go unpunished. The sheer scale of the complaints against these crooks, compounded by a number where violence was used against customers, showed that the companies had traded unethically and with a reckless disregard for commercial probity in their treatment of customers”.
The investigation also showed the companies enticed customers by offering cheap initial quotes for services. Once the quote was accepted, the companies would arrange to collect the vehicle from the customer’s home, often at a competitive flat fee, typically £50.
However, once they collected the vehicle, they would inflate their quotes, and tell customers reluctant to pay the new inflated quote that their vehicle engine had already been dismantled for inspection purposes, which would cost hundreds of pounds to re-assemble.
The companies employed strong-arm sales tactics, including threats and intimidation by ‘engineers’ against customers. This meant customers often reluctantly agreed to pay sums significantly higher than initial quotes, despite being given verbal assurances that initial quotes were ‘fixed and all inclusive’.
Many customers complained that the companies failed to return their vehicles within a reasonable timescale after collection, if at all. Where work was carried out on vehicles, customers claimed it was sub-standard, or had rendered their vehicle a write-off.
On 19 May 2011, the Metropolitan Police raided the joint trading premises of the companies, accompanied by officials from the UK Border Agency, HMRC and the Department for Work and Pensions.

______________________________________________________________

A new specialist unit targeting offshore tax cheats has been launched by HM Revenue & Customs (HMRC).

A new specialist unit targeting offshore tax cheats has been launched by HM Revenue & Customs (HMRC).

The Offshore Co-Ordination Unit (OCU) brings together a team of highly-skilled offshore analysts, technical tax experts and experienced investigators, who will oversee and co-ordinate HMRC’s compliance work to identify and pursue those who hide income and capital in offshore accounts to avoid UK tax and duties.

The unit will look to fully exploit the increasing amount of offshore information at HMRC’s disposal, including bank account data. They will then use this intelligence to develop innovative new ways of tackling offshore tax evasion.

The OCU will continue to build on the success of HMRC’s Liechtenstein Disclosure Facility (LDF) and co-ordinate the recently announced activity in relation to HSBC Geneva account holders. It will also implement the operational aspects of the recently signed tax agreement between Switzerland and the UK, which is expected to raise billions of pounds for the UK.

Exchequer Secretary to the Treasury, David Gauke, said:

“The days when untaxed income or capital could be safely salted away offshore, beyond the reaches of the taxman, are long gone.

“The launch of this specialist unit, together with the other valuable work the department is driving forward in an effort to tackle offshore evasion, underlines the fact that offshore tax cheats are fast running out of places to hide.”

Vince Cable’s employment law reform proposals (Mishcon de Reya)

After much speculation, the Business Secretary, Vince Cable, has today set out the Government’s plans for a radical shake up of employment law. Mr Cable presented a mix of proposals, pledges and requests for views. Further plans for change are contained in the government’s response to the “Resolving Workplace Disputes” consultation, the publication of which coincided with Mr Cable’s speech.

So what is new?  In this alert, we set out some of the main areas put forward for reform.

Unfair dismissal

The Government has confirmed that it is seeking views on:
•    a compensated no-fault dismissal regime for micro firms (10 or fewer employees)
•    radically slimming down existing dismissal processes, including looking at “potentially” changing the Acas Code.
The Government also confirmed the increase in the qualifying period for unfair dismissal to two years from April 2012.

Tribunals

Proposals include:
•    a requirement for all claims to be lodged with Acas for conciliation before they can proceed to tribunal
•    the potential introduction of fees for bringing employment tribunal claims
•    a penalty (at the judge’s discretion) for employers who are found to have breached employment rights
•    consideration of quicker and cheaper alternative to a tribunal hearing (a “rapid resolution” system)
•    a “Fundamental Review” of the whole tribunal system
•    increasing the use of mediation in the workplace.
Protected conversations and Compromise agreements
A new concept of “protected conversations” (conversations that cannot be used as evidence in a tribunal) will be introduced to “allow employers to raise issues such as poor performance or retirement plans in an open way”. There will be consultation on the detail in the New Year.

The Government will look at ways of simplifying compromise agreements (to be renamed “settlement agreements”).

The Government has also:
•    pledged to increase the level of deposit orders from £500 to £1,000 and the level of costs that a tribunal can order a party to pay if their case is vexatious or misconceived from £10,000 to £20,000
•    pledged to close the “loophole” in the whistleblowing legislation which allows employees to blow the whistle on breaches of their own employment contract
•    confirmed its commitment to extend rights to flexible working and introducing a system of shared parental leave
•    called for “evidence” in relation to proposals to reduce the 90 day period for collective redundancy consultation and simplifying TUPE.

Can you have a “Protected Conversation”? (DWF LLP)

Date: 23/11/11

The Government has confirmed this morning, following David Cameron’s comments earlier this month, that it is to consult on the introduction of “protected conversations” which, in Mr Cameron’s words, would mean “a boss and an employee feel able to sit down together and have a frank discussion at either’s request”. Such a conversation could relate, for example, to poor performance or retirement. The aim is for employers to feel that these conversations can take place without the fear of employment tribunal proceedings being brought, or that they could be used as evidence.

As with all such proposals, the devil will be in the detail and it is unclear yet exactly what will be covered by such conversations and how far the protection will go. It is clear that employers would not be able to use protected conversations to cover discriminatory activity, but it remains to be seen how the proposals will work in practice. The risk for employers is that the proposals actually create more confusion and lead to more claims, not fewer, if employers and employees alike misunderstand the extent of the new rights.

Other key proposals include:

The qualifying period for unfair dismissal to be increased from one to two years from April 2012 with the aim of making it more attractive for employers to recruit and easier to manage and let employees go.
The introduction of fees for individuals bringing employment tribunal claims. The result of this might discourage vexatious claims, or “try-ons”.
The introduction of a “rapid resolution scheme” to offer cheaper, quicker decisions on more straightforward claims and for such claims to be settled within three months.
The required consultation period for planned redundancies to be reduced from 90 days to as low as 30 days in order to give businesses flexibility with their business plans.
An overhaul of tribunals which would mean all claims initially go to the Advisory, Conciliation and Arbitration Service (ACAS).  Witness expenses would be ended and only one judge would be used in unfair dismissal cases.  Currently, a copy of the claim form and response will normally be sent to ACAS by the tribunal as ACAS has a statutory duty to endeavour to promote settlement under most employment protection legislation.
A further consultation on simplifying the use of compromise agreements in which employers pay an agreed amount to an employee if both sides agree that a contract should end.
Companies employing fewer than 10 staff may be exempted from employment regulations in order to encourage small, start-up firms.

Whilst the aims of the proposals are to simplify red tape and reduce the number of claims faced by employers, most employers would agree that the proposals are a mixture of good and bad and there is no guarantee that they will achieve these aims in practice.    However, at present, no definite timescale has been given for the introduction of the above measures although the consultation period is expected to start shortly.

Fraser v Southwest London St George’s Mental Health Trust (TLT LLP)

Holiday pay while on sick leave saga continues to unfold…

The EAT has decided in Fraser v Southwest London St George’s Mental Health Trust that an employee on long-term sick leave must request annual leave in accordance with Regulation 15 of the Working Time Regulations 1998 (WTR) in order to be entitled to payment for it.

Background

The ECJ has clearly decided that workers continue to accrue annual leave entitlement during sickness absence (see Stringer and Others v Her Majesty’s Revenue and Customs C-520/06 here). Furthermore, workers who are sick during a period of annual leave have the right, on request, to take annual leave at a later date (see Pereda v Madrid Movilidad SA here).

In Fraser, the EAT had to decide whether an employee could claim holiday pay where no notice to take the leave had been given to the employer under Regulation 15 of the WTR.

Facts

Mrs Fraser went off on long-term sick leave in November 2005 until she was dismissed in October 2008. After the termination of her employment, her employer (the Trust) paid her in lieu of untaken leave accrued in the final leave year, which began in April 2008, but nothing in respect of the two previous leave years, during substantial parts of which she had been receiving no pay at all.

The Trust accepted that, under the WTR, Mrs Fraser had accrued the right to take statutory holiday during the previous two years. However, the Tribunal agreed with the Trust that she had to trigger the entitlement to be paid for it by giving notice under Regulation 15 (which she had failed to do). Consequently, her right to take statutory holiday had extinguished at the end of each leave year in accordance with Regulation 13(9). When Mrs Fraser’s right to take annual leave extinguished, so did her right to be paid in respect of that entitlement.

The Tribunal noted that nothing in Stringer suggested that Regulation 15 does not apply to workers who are off on sick leave.

Mrs Fraser made an appeal which the EAT rejected.

Comment

This case will be welcomed by employers and assists in overruling inconsistent domestic case law. The EAT held that case law such as List Design and Canada Life were wrongly decided. In the EAT’s view, the decision in Kigass Aero Components Ltd v Brown, which decided that payment for annual leave only arises in respect of leave actually taken, was plainly right.

If Mrs Fraser wanted to defer taking statutory holiday until her return to work, she should have requested that the Trust allow this. As she did not do so, her entitlement to statutory holiday (and therefore to holiday pay) extinguished at the end of each leave year.  It is worth noting that, in the EAT’s view, if Mrs Fraser had made a request to defer her statutory holiday, then the Trust “might have been obliged to accede to that request”. Reading between the lines, where an employee has requested a deferment of statutory holiday, the request should be granted.

The fact here was that Mrs Fraser did not take any holiday during the years in question. The ordinary rule is ‘use it or lose it’ and neither the wording nor the purpose of Regulation 14 (which gives a right on termination to pay in lieu of untaken leave) requires the revival of claims for holiday entitlement not taken in previous years. The EAT said that it might be artificial for an employee who is not at work to have to give notice that part of her absence should count as holiday, but thought that this merely reflected the artificiality of a period of long-term sickness counting as holiday in the first place.

This case is clearly at odds with the recent decision in NHS Leeds v Larner.

In Larner, the EAT confirmed that a worker’s failure to request holiday during the relevant leave year does not mean that the right to payment is lost (see our E-Source update here for further information). Note that the Larner case will be heard by the Court of Appeal at the end of this year or early next year, with the decision likely to have a significant effect on the decision made by the EAT in this case.

The landscape relating to sick leave and holiday pay is developing rapidly. As always, we recommend that employers seek legal advice when faced with the dilemma of how much outstanding holiday pay to pay out where an employee leaves having been absent for longer than the current holiday year.

The Government would like to see improved access to bank accounts for undischarged bankrupts.

17/11/2011 11:29

Insolvency Service

Bankrupts to get better financial access

The Government would like to see improved access to bank accounts for undischarged bankrupts. Proposals have been published asking for evidence about the effect bankruptcy has on the ability of individuals to access a bank account and inviting views on possible measures to improve access.

Bankruptcy can be a fresh start for people who have got into an unmanageable debt situation but as a consequence it appears it may lead to difficulties getting a bank account, which hinders their financial rehabilitation.
Without access to a bank account, bankrupts may struggle with basic tasks such as receiving wages and paying bills and this can result in additional expenses for them.
Whilst there is no law that specifically prevents a bankrupt from holding a bank account, it is a decision for a bank whether to offer an account. A trustee can, in very limited circumstances, consider pursuing the bank for loss of money from the bank account following a bankruptcy. For this reason, most banks will not offer even a basic account to undischarged bankrupts.
Business Minister Edward Davey said:
“Access to a bank account is an essential stepping stone to help people manage their finances and to get them back on track after facing up to their financial difficulties. Without access to a bank account, even the simplest financial transaction is beyond reach for an undischarged bankrupt. What I want to see are financially capable consumers who are able to effectively manage their money, and make the fresh start they need.
“If evidence suggests that there are some people that are struggling to get a bank account, I want to see what can be done to help improve their circumstances.”
The purpose of the consultation is to gain information about the number of people affected, which will help inform whether or not formal intervention is needed to improve access to bank accounts for people who are bankrupt. The possible courses of action include:
• Promote providers who currently provide access to bank accounts for undischarged bankrupts – currently two high street banks offer basic bank accounts to undischarged bankrupts.
• Establish a voluntary code for banks – Banks, building societies and other banking service providers already operate under a voluntary code of practice which covers certain products and services and encourages those organisations to provide clear information. The banks could sign up to a code to agree to provide accounts to undischarged bankrupts.
• Providing guidance for trustees in bankruptcy – drafting further detail about the circumstances in which a trustee should consider a claim against a bank and when they are unlikely to, the banks would have a clearer indication of the likely risk of a claim and perhaps be reassured that it would be unlikely
• Introduce legislative change – If non-statutory options seem unlikely to improve the situation, legislation could be amended to reduce or remove any potential liability on a bank.
The consultation seeks to gather evidence on the problem and to explore possible solutions. Interested parties should respond to the consultation on http://www.bis.gov.uk/insolvency/consultation
The consultation will close on 9 Feb 2012.

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