Privy Council’s landmark judgement clarifies rules on insolvent trusts

The Privy Council has handed down a landmark decision which will have a significant impact, not just on insolvent trusts in Jersey, but also more broadly in the common law world. This serves the purpose of clarifying the nature and ranking of a former trustee’s equitable lien in insolvent trusts.

Jersey trusts are often favoured by wealthy individuals as they have a significant advantage for preserving wealth and protecting assets. Therefore, the decision made by the Privy Council in this case has a significant impact outside of the confines of the island of Jersey.

Background

Firstly, what are insolvent trusts? Unlike people or companies, trusts are not a legal entity, and therefore cannot technically be solvent or insolvent. The Royal Court described the term in the case Re Z Trusts [2015] JRC 196C as a useful shorthand. Nevertheless, in practise, these are trustees who have incurred liabilities which exceed the amount or value of the trust fund.

The proceedings for this case were initiated by a former trustee seeking to recover an alleged debt. The matter subsequently proceeded based on an agreed assumption that was the debt was owing and that there were no secured or preferred debts.

The Privy Council considered four principal issues:

whether a trustee’s right of indemnity confers a proprietary interest in the trust assets

if that right of indemnity survives the transfer of the trust assets to a successor trustee

whether a former trustee’s claim ranks in priority to a successor trustee’s equivalent claim, and

if the costs incurred by a trustee in proving its claim are included in the sum capable of recovery by the trustee

Judgement

The first, second and fourth issues were decided unanimously by the Privy Council, while the third question was a 4:3 split decision in favour of the appellant. It also gave rise to three separate judgements by the Privy Council. Let’s go through each of the issues in succession.

On the first issue, the question was: does the right of indemnity confer on the trustee a proprietary interest in the trust assets? This refers to the right to an on-demand payment without the need to prove a breach of contract. The Board were unanimous that their answer to this question was “yes”.

The second issue was directly linked to the first issue. Given that the Board decided that the trustee had a proprietary interest in the trust assets, the question was: does the proprietary interest of a trustee survive the transfer of a trust assets to a successor trustee? The unanimous answer to this question was also yes.

Given that the answer to this question is yes, the third issue is: does a former trustee’s proprietary interest in the trust assets take priority over the equivalent interests of successor trustees? On this issue, the Board split 4:3. The split was between whether the Board should prefer ‘first in time’ or ‘pari passu’. The latter view, pari passu, was the one which the majority view deemed most appropriate.

Pari passu refers to “equal right in payment”, defined by Thomson Reuters Practical Law as meaning that “all unsecured creditors in insolvency processes, such as administration, liquidation and bankruptcy must share equally any available assets of the company or individual, or any proceeds from the sale of any of those assets, in proportion to the debts due to each creditor”.

One of the arguments against first-in-time was that this would subject creditors to settlement of their claims on the basis of the date of the date of appointment of the trustee with whom they contracted. This would not be an equitable arrangement given that the information is both unavailable to creditors and likely to be no more than happenstance in a commercial transaction.

Given the majority decision, the Privy Council favoured pari passu as the method of how claims on ‘insolvent trusts’ as a matter of Jersey law shall be resolved in future.

Finally, the fourth issue focused on the costs of the matter. As part of any claim against the assets of the insolvent trust, should the trustee include its costs of proving that claim? The Privy Council found that a trustee is entitled to recover the costs of its claim as part of its recovery from the trust assets. The reasoning behind this is that the trustee is proving the extent of its existing proprietary interest in those trust assets, rather than ‘proving a claim’.

Our thoughts

This is a hugely significant case in the private client area of law. Prior to this case, there was a lack of clarity regarding the position of current and former trustees of so-called ‘insolvent trusts’. As well as insolvent trusts, it will also have significance in the application of trusts more generally.

This case confirms the position of creditors involved in these cases, who may have claims against current and former trustees. The Privy Council also found that trusts have proprietary interest in the trust asset and that unlike liquidators and directors, trustees can add their costs of claim to their total claim over the trust assets.

Despite this, the decision made by the Privy Council does appear to slightly contradict the notion that trustees have proprietary interest in trust assets. For example, if a former trustee has proprietary interest in a trust asset to indemnify him/her any liability (say totalling 90% of the value of the trust asset), the successor trustee will take on the trust asset subject to such proprietary interest.

Therefore, this will mean that the new trustee at most will have only proprietary interest in the trust asset worth 10% of its value, which will make any pari passu distribution unfair to any former trustees (hence their creditors).

Anyone who would like advice regarding the management of trusts and private client services can contact us directly – our legal experts will be on hand to advise you and assist you with your needs.

Have questions about this article? Get in touch today!

Call us on 020 7928 0276, our phone lines are open and we will be taking calls from 9:30am to 6:00pm.

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James Cook

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Temporary Permission to stay for trafficking victims in new statement of changes

Despite the tumultuousness in British politics at the moment, with three Prime Ministers in three months, there continue to be changes made to UK immigration policy.

Recently reappointed Home Secretary Suella Braverman, previously in the job for just 42 days before leaving due to a security breach, has publicly claimed that modern slavery laws are being abused. These claims drew criticism from the labour abuse watchdog.

Despite Braverman’s claims, in the new Statement of Changes the Home Office has amended the immigration rules in favour of those who are victims of human trafficking or slavery.

Statement of Changes

Our Immigration Supervisor, Mahfuz Ahmed, outlines the new Statement of Changes and what it will mean for those affected.

The Home Office has published a new Statement of Changes in Immigration Rules HC 719 inserting Appendix Temporary Permission to Stay for Victims of Human Trafficking or Slavery.

This establishes a route for those who have received conclusive grounds that they are a victim of Human Trafficking or Slavery to be considered for temporary leave.

To be granted leave on this route, a person must show that the grant of permission to stay is necessary due to the following:

1. Assisting the person in their recovery from a physical or psychological harm arising from the relevant exploitation; or

2. Enabling the person to seek compensation

3. Enabling the person to cop-operate with a public authority.

Previously, recovery was not taken into consideration, as the requirement was instead “personal circumstances … are so compelling”. We believe that this change was overdue as the previous ‘compelling’ requirement rendered the threshold too high.

Victims of Human Trafficking and Slavery will be granted leave to remain up to a maximum of 30 months. During this time, they will be able to access public funds, study and work would be permitted.

Should you require assistance in applying for leave under this new route, then do contact us.

Have questions about this article? Get in touch today!

Call us on 020 7928 0276, our phone lines are open and we will be taking calls from 9:30am to 6:00pm.

Email us on [email protected].

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James Cook

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Lisa’s Law table tennis social is a smash hit!

At Lisa’s Law, while we work hard, we also like to enjoy a bit of downtime together every once and a while. Our recent Autumn social event was certainly no exception.

After our regular quarterly meeting, we made our way over to the popular area of Shoreditch in East London, a short tube ride from our offices in Elephant and Castle. We were kindly hosted by Bounce, a table tennis bar with the most ping pong balls you’ve ever seen in one place!

As well as being provided with an excellent selection of food and drinks, we also took part in our very own inaugural Lisa’s Law table tennis doubles tournament courtesy of the kind staff at Bounce. While not everyone was particularly familiar with doubles table tennis, lawyers are particularly well-suited to learning rules, so it didn’t take long until everyone had their eye on the ball. It was a hard-fought tournament, and there was certainly no competitive spirit left at the office!

Bounce pizza - Lisa's Law Solicitors - Lisa's Law Solicitors — A great selection of tasty pizza

But after an exciting tournament which culminated in a close final, there was one team that came out on top – our Management Director Chuanli Ding and Legal Advisor, Lily Dai. We would thoroughly recommend this venue to anyone, whether it’s a work social or you’re just looking for somewhere to hang out with friends.

Ding and Lily - Lisa's Law Solicitors - Lisa's Law Solicitors — The winners Managing Director Ding and legal advisor Lily

We look forward to the next social event, which will be our annual Lisa’s Law Christmas party. In the meantime, please don’t hesitate to get in touch with us using the details down below.

Have questions about this article? Get in touch today!

Call us on 020 7928 0276, our phone lines are open and we will be taking calls from 9:30am to 6:00pm.

Email us on [email protected].

Use the Ask Lisa function on our website. Simply enter your details and leave a message, we will get right back to you: https://lisaslaw.co.uk/ask-question/

Or, download our free app! You can launch an enquiry, scan over documents, check progress on your case and much more!

James Cook

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Indefinite leave to remain on the 10-year long residence route granted despite nearly 1200 days abroad

This article was written by our legal advisor, Zeyu Huang.

We have recently been successful in an application of indefinite leave to remain on the 10-year long residence route. Settlement status was granted despite nearly 1200 days spent outside the UK.

Our client made an application based on exceptional circumstances outside the immigration rules.

Background

Our client arrived in the UK on a child student visa in 2011 and started to receive a British education from the age of 14. She enjoyed a smooth transition to British life until the outbreak of Covid-19 in March 2020. Like lots of international students during the pandemic, she came back to China to stay with her family. Our client then returned to the UK in February 2022 via a new student visa following the UK’s large decline in Covid-19 cases.

Our client’s absence from the UK totals 1149 days, with the last absence being a total of 684 days during the Covid-19 pandemic between 2020 and 2022.

We made the application for our client on the basis of 10-year lawful residence outside of the rules on absence for settlement. Absence for settlement requires up to 540 days in total and 180 days for a single absence.

The application

In our legal representation letter, our core submissions were as follows:

1. We argued that our client’s last absence period in China totalling 684 days should be regarded as an exceptional circumstance. Our argument also focused on the strict circuit breakers between China and the UK implemented by China during the pandemic, demonstrating the rationality of this 684-day absence from the UK.

2. We argued for our client on the grounds of her private life established in the UK from the past decade. Our client has been in the UK since childhood, receiving a British education and forming social networks with people, something proven by her graduate certificates, social events and her own property in London.

The approved decision was received the next day of providing our client’s biometric information, as our client chose the priority service.

Our comments

This successful application of settlement is of great significant to our client and her family. If it was rejected by the Home Office, it would lead to a seriously adverse impact on both the life of our client established in the UK, as well as the devotion and support from her family back in China.

We are very pleased with the result, as our client has been granted settlement on the 10 year long residence route after her absence from the UK during the Covid-19 pandemic.

Have questions about this article? Get in touch today!

Call us on 020 7928 0276, our phone lines are open and we will be taking calls from 9:30am to 6:00pm.

Email us on [email protected].

Use the Ask Lisa function on our website. Simply enter your details and leave a message, we will get right back to you: https://lisaslaw.co.uk/ask-question/

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James Cook

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Chancellor reverses mini budget fiscal policies in attempt to shore up flagging UK economy

The arrival of a new government usually precipitates a “honeymoon period”, a time when the government enjoys steady waters, a bounce in the polls, and is given greater leeway over legislation. Needless to say for anyone who has been following the news, this has not been the case for Liz Truss’ government.

As the political fallout from the mini budget continues, the new Chancellor of the Exchequer, Jeremy Hunt, has almost entirely reversed the fiscal measures announced a few weeks ago by his predecessor, Kwasi Kwarteng. With Liz Truss having become Prime Minister on the basis of the policies announced in Kwarteng’s mini budget, this failure is hugely significant for the survival of her nascent premiership.

Indeed, the only policy from the mini budget left standing is the end of the cap on bankers’ bonuses – itself a controversial measure. This has led many political commentators to claim that the new Chancellor is now effectively the de facto Prime Minister.

After we took a deep dive into the mini budget in a previous article (see here), keep reading to learn which policies Jeremy Hunt has chucked, and how it might affect you.

What fiscal policies has Hunt reversed?

Following the unprecedented reversal of a fiscal policy platform after just a few weeks of government, there is a lot of detail for us to dig into. Let’s take a look at each of the policies Hunt has scrapped as the government attempts to shore up the flagging British economy.

The cut to 19% of the basic rate of income tax from 20% has been cancelled. The government had originally said that 31 million people would save £170 a year from the cut.

The 2-year energy price guarantee – Liz Truss’ landmark policy. It has now been limited until April 2023 and Hunt suggested that there would be a new approach targeting those in the most need from April. The average annual energy bill is expected to rise to more than £4000 following the change.

The scrapping of the 45p top rate of tax for earnings over £150,000 per year has been reversed.

Corporation tax will increase to 25%. Truss had previously promised to freeze corporation tax at 19%, in contrast with previous Chancellor Rishi Sunak’s pledge to increase it to 25%. Britain would continue to have the lowest corporation tax rate in the G7.

Scrapping of the alcohol duty freeze. Alcohol duty will subsequently increase in line with inflation, as measured by the retail price index which is currently at 12.3%.

Changes to off-payroll working, known as IR35 reforms have also been cancelled. The change to IR35 rules would have meant that companies would no longer be responsible for ensuring their contractors were paying the right amount of tax

VAT free shopping for international tourists has been cancelled

Freeze on alcohol duty, which would have cost £600m has been reversed

Cuts to the tax paid on shareholder’s dividends

What measures will remain?

There are some tax measures which have already begun the legislation process that will remain. These include the following:

The reverse in the rise of national insurance. The 1.25% percentage point increase will be axed from November.

The cut to stamp duty. Stamp duty has been doubled to £250,000, while the threshold for first-time buyers will rise to £425,000

The removal of the cap on bankers’ bonuses, which previously capped bonuses at twice an employee’s salary.

Will these measures help the UK economy?

Kwarteng’s tenure as Chancellor, the second shortest in British history, could hardly have been more disastrous. His replacement, Jeremy Hunt, has been chosen in an attempt by the government to reassure the financial markets and instil a sense of calm to the country. While Truss and Kwarteng are from the libertarian right of the Conservative Party, Hunt is usually identified as coming from the centre of the party. The choice of a Chancellor from a different wing of the party underlines Truss’s desperation to save her premiership.

The markets may be more assured by the fact that the government will not be forced into borrowing as much now that the majority of Truss’ policies have been scrapped, however there is still a £27.7bn black hole in the government finances according to the BBC. The cost of borrowing will also now be considerably higher for the government for the foreseeable future, which Hunt has hinted may lead to tax rises and cuts to public services.

Hunt will make a further announcement during his fiscal statement on 31^st October, where he will outline how the government intends to reduce public sector debt as a share of national income over time. However, it remains to be seen whether these fiscal measures introduced by the new Chancellor will help to turn the tide on the British economy.

Have questions about this article? Get in touch today!

Call us on 020 7928 0276, our phone lines are open and we will be taking calls from 9:30am to 6:00pm.

Email us on [email protected].

Use the Ask Lisa function on our website. Simply enter your details and leave a message, we will get right back to you: https://lisaslaw.co.uk/ask-question/

Or, download our free app! You can launch an enquiry, scan over documents, check progress on your case and much more!

James Cook

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Lisa’s Law employee qualifies as a solicitor!

We are very proud to announce that Lisa’s Law employee, Stephanie Chiu, has recently been admitted to the Roll of Solicitors with the Solicitors Regulation Authority (SRA) and has therefore qualified as a solicitor. Stephanie joins a select group of Solicitors at the firm.

Stephanie first joined the firm as a Paralegal in November 2019 and has carried out excellent work over the last three years under the guidance of our Head of Conveyancing, Elin Lee. Stephanie has demonstrated incredible commitment to her clients and the company in her most recent role as a trainee solicitor as she studied to earn her solicitor qualification.

She has great knowledge of property law and and has conducted many successful purchases and sales of both residential and commercial properties. We are delighted that Stephanie will be furthering her career with Lisa’s Law and look forward to her continuing to deliver for her clients.

Stephanie and Elin - Lisa's Law Solicitors - Lisa's Law Solicitors — Stephanie and Head of Conveyancing Elin Lee

As well as her professional credentials, Stephanie’s academic achievements include holding a degree in LLB from the University of Kent and has previously completed the Legal Practise Course at the BPP University in London. She is also fluent in English, Mandarin, and Cantonese.

How does one become a solicitor?

The journey towards qualifying as a solicitor in England and Wales is a long one which requires several stages of training. This takes approximately 6 years of studying and training overall.

These stages include the following:

Any degree or equivalent level 6 qualification (or a comparable overseas qualification)
Passing both stages of the Solicitors Qualifying Examinations (SQE)
Two years’ full time (or equivalent) work experience
Passing a final character and suitability test

In addition, the level 7 trailblazer solicitor apprenticeship also offers a work-based way of qualifying.

The character and suitability test is held by the SRA. If someone does not meet the character and suitability requirements of the SRA then they will not be admitted as a Solicitor. Some of the reasons for failing this may include cautions or criminal convictions.

Have questions about this article? Get in touch today!

Call us on 020 7928 0276, our phone lines are open and we will be taking calls from 9:30am to 6:00pm.

Email us on [email protected].

Use the Ask Lisa function on our website. Simply enter your details and leave a message, we will get right back to you: https://lisaslaw.co.uk/ask-question/

Or, download our free app! You can launch an enquiry, scan over documents, check progress on your case and much more!

James Cook

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How to End a Commercial Property Lease Early

No matter how long it takes, it’s inevitable that at some point either a tenant or landlord will wish to end a commercial property lease. This can come either at the end of the lease period, or indeed, earlier than this point. If you would like legal advice when it comes to ending a commercial lease, get in touch with us here.

There are a number of reasons why you may wish to end a commercial lease early. This could include outgrowing your office, or if your company is struggling financially and you are in need of a lease which better matches your requirements.

But how exactly does a commercial lease end?

There are three main ways in which a commercial lease can end. These include:

1. Exercising a break clause

2. Surrendering the lease

3. Waiting for the lease to expire

These are vastly different circumstances which affect the way in which a commercial lease ends. Let’s take a look at each of these in detail, starting with break clauses.

Break clause

Break clauses are common clauses in commercial property leases which allow commercial tenants or landlords to end a lease early without facing a penalty. They can be included in a fixed-term lease and typically come at one or more fixed points in time, such as eighteen months into a three-year lease.

The two main types of break clauses are:

1. A fixed date notice – which brings the lease to an end on a particular day

2. A rolling data notice – which allows a notice to be served on or after a particular day

We would advise you to ensure that even after notice is given, you continue to comply with the provisions of the notice from the point the notice is given and until it actually ends. The break clause will say how long the notice is. We would also advise tenants to seek advice before deploying a break clause.

Compliance with the notice period is particularly important when it comes to a fixed date notice, with the consequences for not complying with this being potentially damaging.

Break clauses typically have several conditions which must be complied with. These include:

The date
The length of notice
Who receives the notice
How the notice has to be served
Where the notice has to be served
Payment of rent and any service charge when due

It is also worth bearing in mind the fact that once notice for a break clause has been given, it cannot be withdrawn. This is the case even if both the tenant and landlord agree to waive the break notice.

Surrendering the lease

As well as a break clause, in some cases it is also possible to end your lease with your landlord’s agreement, known as surrendering the lease. Unlike with a break clause, there is no obligation on a landlord’s behalf to accept the surrender of a commercial lease. We would always advise you to consult a legal expert when considering surrendering your lease, as it may be that you have further legal obligation to your landlord which you are not aware. However, like a break clause, there are two main ways in which a lease can be surrendered.

1. Express surrender in writing

Express surrender in writing is the most common form of surrendering a lease and involves an express written declaration by the parties stating that they wish to surrender the lease. While this is the more expensive option, it does provide more certainty about the intentions of the parties involved.

It will usually include the date of the surrender as well as matters such as: whether you will have to pay the landlord to surrender the lease, liability for the cost of repairs to the property, responsibility for any claims that arise under the lease’s terms once it has come to an end. You should also be aware of whether you will have any rights against the landlord for any breaches of the lease once the lease has ended.

2. Implied surrender by conduct

This term is also referred to as surrender by operation of law. Implied surrender by conduct would involve handing the property back to the landlord, usually through the delivery of the keys. However, the landlord must accept the early surrender. It is not enough for the tenant to merely hand the keys back and vacate the property. One of the major pitfalls with implied surrender by conduct is that you don’t necessarily know on what basis the lease has been surrendered, if at all. This may result in you facing legal action further down the line from the landlord.

In both cases the landlord may ask for payment as compensation for the loss of a rental income. Once the lease has been surrendered, the tenant no longer has any liabilities to pay future rent or comply with the terms of the lease. Nevertheless, the outgoing tenant remains liable up until the date of surrender.

In most cases, we would advise commercial tenants to ensure that if they are going to surrender their lease, that they have express surrender in writing. This will help to prevent any complications further down the line such as whether the landlord may sue you for rent arrears, service charge arrears, damage to the property, as well as any compensation for leaving the property without the landlord’s agreement.

Waiting for a lease to expire

You might think that once your lease comes to the end of a term, it will be terminated automatically. But this is not always the case. The Landlord and Tenant Act 1954 provides a couple of key provisions for ending the lease once it has expired. However, they are mutually exclusive and can’t both be served. From a tenant’s point of view, it is possible to:

1. Serve a Section 26 notice

The primary purpose of Section 26, the Landlord and Tenant Act 1954 is for tenants to service notices on landlord to request for new tenancies. Once the notices are served, their direct effect is to terminate the tenancies immediately before the specified dates in the notices. It is clearly not the best option to choose if you wish to leave the property you are occupying. However, it is a good option to choose if you wish to end your current lease and negotiate better terms including a lower rent for your new lease.

2. Serve a Section 27 notice

Serving a Section 27 notice is by far the better of the two options if you wish to leave your current property. This is particularly useful if your landlord does not show any sign of ending the lease on its expiry. Section 27 allows you to serve either at least three months of the term to serve a notice which ends the lease on the contract’s expiry date or at least three months’ notice after the contractual expiry date.

Subletting your property

Another option, if whatever reason you are unable to terminate your lease, you may also have the option to sublet your tease. However, this is usually only possible if there is a clause in your contract which allows you to sublet. This may be the most financially beneficial in your circumstances, as it can allow you to use rent payments from your tenant that you have sub-let to in order to meet the financial obligations of your lease. You may however not be able to charge more than you pay in rent yourself.

It is also worth bearing in mind that you will take on greater responsibility in managing the premises, as you become the landlord of the incoming tenant. As the landlord, you will likely also be the main contact for any queries relating to the property.

Landlords will usually wish to approve the terms of a sublet before consenting to this new arrangement.

Our thoughts on ending a commercial property lease early

Before looking to end a commercial property lease early, it is always worth seeking legal advice to ensure that you meet the responsibilities required. There are often many costs associated with ending a commercial property lease early, and a small error can result in you facing significant penalties for failing to meet certain conditions. In some cases, especially where there is no break clause, it may be more worthwhile simply waiting for a commercial lease to expire. This is especially true where you are on a shorter lease.

Nevertheless, our conveyancing experts in commercial property team will be able to offer you our specialist advice at highly competitive rates. We have experience in helping both commercial tenants and landlords to terminate commercial leases before their expiration date. Get in touch with us by clicking here.

Have questions about this article? Get in touch today!

Call us on 020 7928 0276, our phone lines are open and we will be taking calls from 9:30am to 6:00pm.

Email us on [email protected].

Use the Ask Lisa function on our website. Simply enter your details and leave a message, we will get right back to you: https://lisaslaw.co.uk/ask-question/

Or, download our free app! You can launch an enquiry, scan over documents, check progress on your case and much more!

James Cook

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Does size really matter? First-tier Tribunal decides ‘Mega Marshmallows’ should not be subject to standard VAT rate

It appears that when it comes to confectionary, size certainly does matter. In a recent case, Innovative Bites Ltd v Revenue and Customs Commissioners, the First-tier Tribunal decided that a food product called “Mega Marshmallows” was not a confectionary and therefore is VAT zero rated. This is not the case with standard marshmallows, which are classed as confectionary and therefore subject to the standard 20% VAT rate.

Let’s take a look at the case details.

Case background

HMRC decided that Innovative Bites Ltd’s product should be classed as confectionary, and should therefore be standard rated. Assessments were issued to the appellant in August 2019, which covered supplies of the product between June 2015 and June 2019. These assessments totalled £472,928.

So, what was the case for the Mega Marshmallow not being deemed a confectionary?

You may have heard of a “s’more”. It’s a traditional American campfire snack which consists of roasted marshmallows and chocolate that is layered between biscuits (graham crackers).

The appellant claimed that the marshmallow would not usually be intended to be eaten by itself. Instead, the argument made is that it is essentially an ingredient which is roasted. It is therefore not intended to be eaten before being roasted and the argument is that it should not be classed as a confectionary.

Confectionary, not including cakes or biscuits, are generally standard rated. While there is no set definition of confectionary, the legal framework from Note 5 Group 1 does provide the following explanation: “’confectionery’ includes chocolates, sweets and biscuits; drained, glacé or crystallised fruits; and any item of sweetened prepared food which is normally eaten with the fingers.”

The product itself has several references to the fact that it is intended to be used for the purposes of making s’mores. This includes stating on the packaging that they are “perfect for roasting, s’mores or just snacking”. The reverse of the packaging also provides “instructions for use” which provide instructions for roasting marshmallows over a campfire. It also provides instructions for how to make a s’more.

The seasonality of Innovative Bites’ marshmallow sales was also shown as evidence that the Mega Marshmallows are more frequently purchased to be roasted. While sales of all marshmallows tend to be higher in the months between May and October, sales of the Mega Marshmallows show a higher percentage than other mallow products, with 65% compared to 56%. The implication is therefore that the Mega Marshmallows produced by Innovative Bites are more likely to be roasted over a flame.

Why could it be deemed confectionary?

HMRC asked the First-tier Tribunal to consider the following factors which indicate the product would tend to be deemed confectionary.

The Product can be eaten as a snack from the bag, as with regular marshmallows.
The packaging identifies it as a product which may be consumed as a snack.
It is generally eaten with the fingers, either without roasting or once roasted and allowed to cool down.
The Product may be eaten as a snack “on the go”.
There is a trend for outsized chocolate and sweets, of which the Product might be viewed as an example.
Regular marshmallows, which are properly viewed as confectionery, can be roasted and enjoyed in the same way as the Product. They would have been enjoyed as such before the introduction of large marshmallows.
The Product is found on the appellant’s website in the category of “sweets, candy and chocolate”.

Why should it not be deemed confectionary?

Nevertheless, there are also a number of factors which suggest it is not typically deemed confectionary. Some of the reasons Innovative Bites put forward include:

The Product is not normally eaten with the fingers in circumstances where it is roasted on a stick. Consumers would not normally use an implement to eat confectionery, in this case the stick on which the Product is roasted.
Items which are intended to be subject to a further cooking process would not be expected to fall within the term confectionery.
The Product is marketed as being intended for roasting. Hence it does not appear on the confectionery shelves of supermarkets but is placed in the world foods section and, more importantly, in the barbecue section during the summer months when most sales are made.
The packaging of the Product holds it out as primarily intended to be roasted
The fact that it is a seasonal product which is enjoyed more in the summer months than regular marshmallow products demonstrates that customers do tend to roast the Product.
Customers wishing to purchase a marshmallow as a sweet snack would tend to choose a regular marshmallow.
The depiction of a cartoon chef character with a reference to “Baking Buddy” marks it as an ingredient rather than an item of confectionery.

First-tier Tribunal judgement

The Tribunal had to decide whether the term confectionary includes items which is intended to be subjected to a cooking process before being eaten, and to a certain extent used as an ingredient in making another product.

The tribunal decided that the ‘Mega Marshmallows’ should not be categorised as confectionary and should therefore not be subjected to the standard rate of VAT.

While the tribunal considered all of the arguments, it decided that its packaging, marketing, size, and position in the barbecue section in supermarket aisles means that it cannot be described as confectionary according to the criteria outlined earlier.

The First-tier Tribunal therefore gave the appellant permission for the right to appeal.

Our thoughts

This case is a clear example of the nuances of tax law. While on first glance it might seem as though the mega marshmallow would be described as confectionary, the conclusion which the First-tier Tribunal came to is one which seems most agreeable for the reasons explained earlier. Innovative Bites will clearly be glad that the First-tier Tribunal came to this conclusion, and will now have the opportunity to appeal against the large tax bill which HMRC had given them.

It is worth bearing in mind whether your business needs to be registered for VAT, as all businesses in the UK with an annual income of over £83,000 are subject to paying VAT. Businesses are required to keep adequate records in order to accurately record VAT and must also submit online returns and pay any VAT which is owed electronically.

Reasonable tax appeals and tax refunds are encouraged, and the professional commercial law team at Lisa Law Firm can provide you with consultation and services should you require it.

Have questions about this article? Get in touch today!

Call us on 020 7928 0276, our phone lines are open and we will be taking calls from 9:30am to 6:00pm.

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Use the Ask Lisa function on our website. Simply enter your details and leave a message, we will get right back to you: https://lisaslaw.co.uk/ask-question/

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James Cook

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How will Priti Patel’s time as Home Secretary be remembered? And what can we expect from her successor, Suella Braverman?

After over three years in the role, former Home Secretary Priti Patel has been replaced. Her successor, Suella Braverman, represents something of a continuity figure in the role. Like Patel, she is both firmly on the right of the Conservative Party and a Brexiteer.

Formerly the Attorney General, some of Braverman’s most well-known views include withdrawal from the European Convention on Human Rights as well as supporting the sending of cross-channel migrants to Rwanda. She ran for the leadership in the most recent Conservative leadership contest and was eliminated in the second round with 27 votes.

But what can we expect from Braverman as Home Secretary and how will the Patel era be remembered?

Priti Patel – did she take back control?

Priti Patel’s time as Home Secretary under Boris Johnson’s premiership is likely be remembered as a tumultuous period. In her resignation letter, the former Home Secretary outlined some of her main achievements in the role as ending free movement and “taking back control of our borders” – a clear nod to Brexit and the reform to immigration.

But is it right to say that Britain has taken back control of its borders?

While EU immigration has plummeted, non-EU immigration to the UK reached its highest level ever recorded in December 2019. Furthermore, the unprecedented rise in small boat crossings over the past few years occurred almost exclusively under Patel.

When Patel was appointed in July 2019, the beginning of the Johnson premiership, the number of people crossing the English Channel in a small boat was fairly negligible, barely reaching 500. By the end of her time as Home Secretary in August 2022, the monthly total was 8,700 – the highest month total on record.

In order to deal with this, the government signed what Patel describes as a “world-first Migration and Economic Development Partnership” with Rwanda. However, enforced and voluntary returns are now at an near all-time low, decreasing from 45,000 in 2010 to 10,000 in 2021.

Other significant immigration policies and events which occurred with Patel as Home Secretary included the exit of Britain from the European Union in January 2020. This marked the advent of the points-based immigration system and the end of free movement with Europe, a substantial shift in immigration policy. This means that there is a blanket approach towards immigration regardless of where immigrants come from. To work in the UK, applicants require 70 points.

The Nationality and Border Act was another significant piece of legislation introduced by Patel. Under it a two-tier asylum system was introduced, making it so that those who make asylum claims after travelling through a third country such as France are inadmissible, with some exceptions.

Another legacy of Patel’s time as Home Secretary is the asylum backlog, which under her stewardship has gone from 40,000 to over 120,000. At the same time, the success rate for initial asylum applications actually rose to a new high of 76%, increasing from 25% in 2010. While Patel frequently railed against those crossing the Channel in small boats, the reality is that the vast majority of them were genuine refugees.

Finally, the Windrush compensation scheme which arose out of the Windrush scandal in 2018 has been largely unsuccessful. The Wendy Williams report published in March 2022 found that the Home Office had failed to take a more compassionate approach and had broken pledges to transform its culture.

Suella Braverman – a more extreme Home Secretary than Patel?

Despite Truss’s government being expected to take a more relaxed approach towards legal immigration, the same cannot be said for those who arrive as asylum seekers or illegally.

In recent days, the new Home Secretary Suella Braverman has been outspoken in interviews by saying that Britain has too many low-skilled migrants and international students who bring over dependants. This is despite the fact that under the new points-based immigration system, there is no route for low-skilled workers. It also appears to contradict recent briefings from the government that immigration rules will be loosened under the new Prime Minister Liz Truss as part of her ‘growth plan’, which recently u-turned on its cut to the top rate of tax.

In her speech at the Conservative Party conference, Braverman set out plans to bar those crossing the English Channel from claiming asylum in the UK. This would be a clear breach of the European Convention on Human Rights and the 1951 Refugee Convention. Braverman is also strongly supportive of the Rwanda plan introduced by Priti Patel, stating “I would love to have a front page of The Telegraph with a plane taking off to Rwanda, that’s my dream, it’s my obsession.” Judges are expected to rule on both High Court challenges to the Rwanda policy later this month.

Braverman was a fierce proponent of the British Bill of Rights proposed by Dominic Raab which would have given the UK Supreme Court legal supremacy over the European Court of Human Rights. One of its aims was to make it easier for the UK to deport immigrants and asylum seekers without facing legal challenges from European courts. Braverman has mentioned in recent days how she wishes to bring down immigration levels to “tens of thousands”, with the figure currently standing at 239,000.

However, the Truss government have recently ridden back on the idea of the British Bill of Rights, and it seems unlikely to go ahead at this moment in time. You can find out more about the British Bill of Rights here.

Despite resistance from the new Home Secretary, Prime Minister Liz Truss has ordered a review of the shortage occupation list, which would allow certain industries to bring in staff from overseas. This is in response to the UK’s labour shortage, which has followed the exit of the UK from the European Union.

Our thoughts

The UK’s hard-line approach towards immigration is likely to get tougher under Braverman, whose rhetoric in recent days has been harsh towards refugees, modern slavery victims, and low-skilled workers. With the Prime Minister and the Home Secretary seemingly at odds over immigration levels, it remains to be seen who will win this particular battle.

As usual, Lisa’s Law will bring you all the big news with regards to immigration. The biggest policy announcement so far from Braverman has been that she plans to go further than Patel by bringing in legislation banning those who enter the UK illegally from claiming asylum. It remains to be seen what legislation will be introduced over the next few months.

Have questions about this article? Get in touch today!

Call us on 020 7928 0276, our phone lines are open and we will be taking calls from 9:30am to 6:00pm.

Email us on [email protected].

Use the Ask Lisa function on our website. Simply enter your details and leave a message, we will get right back to you: https://lisaslaw.co.uk/ask-question/

Or, download our free app! You can launch an enquiry, scan over documents, check progress on your case and much more!

James Cook

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Is supporting a football team grounds for unfair dismissal under the Equality Act 2010?

“Some people think football is a matter of life and death. I assure you, it’s much more serious than that”. This famous quote by Bill Shankly is certainly a sentiment the claimant in this case, a life-long Rangers fan, would identify with.

Like Shankly, the claimant in this case was a fellow Scot. But unlike Shankly, who breached the sectarian divide in Glasgow between Celtic and Rangers, Mr McClung’s case rested on his fanaticism for Rangers Football Club and its loyalty to the United Kingdom and the Queen.

It is due to his support Rangers Football Club that Mr McClung believes he was denied work by his Celtic supporting manager while working as a subcontractor. He subsequently brought claims forward for unfair dismissal and discrimination.

Let’s take a deep dive into this case and see what conclusion the court came to.

Case background

To echo the words of Shankly, Mr McClung argued that supporting Rangers was a way of life and that it was as important for him as it was for religious people to go to church.

The claimant described Rangers fans as caring passionately about the Queen and having loyalty to Northern Ireland and the UK at large. Rangers and Celtic represent the sectarian divide of Protestants and Catholics which can be found in Scotland’s most populous city, Glasgow.

The employment tribunal decision in this case concerns the question of whether Mr McClung’s support of Rangers could qualify as a protected belief under the Equality Act 2010.

The Equality Act 2010

Section 10 of the Equality Act refers to the following:

(1) Religion means any religion and a reference to religion includes a reference to a lack of religion.

(2) Belief means any religious or philosophical belief and a reference to belief includes a reference to a lack of belief.

(3) In relation to the protected characteristic of religion or belief—

(a) a reference to a person who has a particular protected characteristic is a reference to a person of a particular religion or belief;

(b) a reference to persons who share a protected characteristic is a reference to persons who are of the same religion or belief.

The 2010 Act does not actually define what a “philosophical belief” is, however the Explanatory notes to the Equality Act sets out that for a philosophical belief to be protected under the Act:

it must be genuinely held;
it must be a belief and not an opinion or viewpoint based on the present state

of information available;

it must be a belief as to a weighty and substantial aspect of human life and

behaviour;

it must attain a certain level of cogency, seriousness, cohesion and

importance and

it must be worthy or respect in a democratic society, not incompatible with

human dignity and not conflict with the fundamental rights of others.”

The claimant put forward the argument that due to his strong Unionist views, allegiance to the Queen, and protestant views, views he claims the “vast majority of Rangers fans” hold, his support of Rangers qualified as a philosophical belief.

Judgement

This was dismissed by the judge for a number of reasons, who considered the 5 components of the Grainger criteria during his dismissal. While they conceded that the claimant’s support of Rangers was genuine, for the second criteria they drew comparisons between supporting Rangers and being an active member or support for a political party, which had been dismissed in previous cases as constituting a philosophical belief.

The word ‘support’ contrasts with the word ‘belief’, which the judge defined as “an acceptance that something exists or is true, especially one without proof” or “an acceptance one accepts as true or real; a firmly held opinion”. It is for this reason that the judge found a comparison between support for a football club and support for a political party.

The third aspect of the Grainger criteria concerns whether the belief is a “weighty and substantial aspect of human life and behaviour”. In this aspect, the claimant made reference to the Casamitjana case where it was decided that ethical veganism met all five of the Grainger criteria. Ethical veganism was therefore found to be eligible for protection under the Equality Act.

However, in this case it was found that ethnical veganism was a belief rooted in morality and prevalent in all aspects of the employee’s life. In contrast, the judge found that support for a football club was akin to a lifestyle choice rather than relating to a “substantial aspect of human life and behaviour”. The judge therefore found that the claimant did not satisfy the third criterion.

The penultimate criterion was that the belief must attain a “certain level of cogency, seriousness, cohesion and importance.” While the claimant’s support of Rangers was a serious and important matter to him, and he displayed support for the Union and loyalty to the Queen, the judge found that these factors were not prerequisites. Not all fans would support these factors. The judge decided that beyond a desire for the team to do well/win, support for Rangers has no larger consequences for humanity as a whole. The claimant therefore did not satisfy the fourth criterion.

Finally, the belief must be “worthy of respect in a democratic society, be not incompatible with human dignity and not conflict with fundamental rights of others.” While the judge found the claimant’s support for Rangers was worthy of respect, the judge was not persuaded that it invoked the same respect in a democratic society as ethical veganism or the governance of a country.” He therefore did not satisfy the fifth criterion either.

With four out of the five criterions dismissed by the judge, the conclusion was that supporting a football team was clearly not a protected philosophical belief under the Equality Act 2010. As a result, this cannot be relied upon when it comes to claiming discrimination under the Equality Act 2010.

Our thoughts

The judgement which the judge came to through the usage of the Grainger criteria was well thought out and applicable in this case. For something to be a protected characteristic, there must be significant evidence that it constitutes a philosophical belief under Section 10 of the Equality Act 2010.

Ironically, support of a club like Rangers probably comes closest to this, owing to its significant links to the sectarian divide in Scotland and Northern Ireland. It is possible that another judge may therefore have been more sympathetic to the view put forward by the claimant in this case. However, for now at least, support for a football club is not a protected philosophical belief in the United Kingdom.

Have questions about this article? Get in touch today!

Call us on 020 7928 0276, our phone lines are open and we will be taking calls from 9:30am to 6:00pm.

Email us on [email protected].

Use the Ask Lisa function on our website. Simply enter your details and leave a message, we will get right back to you: https://lisaslaw.co.uk/ask-question/

Or, download our free app! You can launch an enquiry, scan over documents, check progress on your case and much more!

James Cook

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