Family Investment Company – A Good Idea

Perhaps something that may have slipped by most people in the Chancellor’s Summer Budget was the commitment to reduce Corporation Tax firstly from 20% to 19% by 2017 and then to 18% by 2020. The United Kingdom already enjoys one of the lowest Corporation Tax rates in the developed world comparing favourably with the United States (40%), Japan (33%) and Germany (29.65%).

It may not be immediately apparent how this impacts on estate planning so allow me to introduce the concept of a Family Investment Company (FIC). Since the Finance Act 2006 removed much of the favourable tax treatment for trusts there has been a comparative lack of alternatives to the more traditional trust structure.

In short a FIC is a private company whose shareholders are members of the same family. The shares can be structured to allow the ownership of the underlying assets to pass to the next generation without the older family members relinquishing control of the underlying assets before they are ready to do so.

If the initial subscription for shares is in cash there is no tax charge on setting up the FIC. If land or property is used it is likely there would be capital gains and stamp duty tax implications.

Perhaps this is best illustrated by example. The Jones family have considerable cash savings and create a FIC with Mr and Mrs Jones as directors and their four adult children as shareholders. They transfer £3.5 million in cash into the FIC with no tax implications.

As Mr and Mrs Jones wish to retain control over the company the children are not given voting rights meaning they are entitled to receive dividends and also to capital should the FIC be wound up.

Any profits the FIC makes are taxable at 20% which is significantly lower than the higher rate of income tax (40 or 45%) or the rate applicable to discretionary trusts (37.5 or 40%). Any UK dividend income received by the FIC will not be subject to tax but interest, rent and other income will be.

There is however the possibility of double taxation within the FIC structure where profits are first taxed at 20% and are then subject to income tax in the hands of the shareholders. It is still possible for shareholders to make tax efficient withdrawals in the form of dividends subject to their personal circumstances.

This is not to say that trusts no longer serve a purpose in estate planning. Where assets can be transferred into trust without incurring a charge to inheritance tax possibly through the use of business property relief or agricultural property relief it is likely that the more traditional trust structure will still prove to be more suitable. If the assets are cash a FIC is something that should be seriously considered as an alternative to a trust.

If the Treasury is committed to a scheme of graduated reductions in the rate of Corporation Tax it is likely that the FIC will become an ever more popular vehicle in estate planning in the years ahead.

If I can help or if you would like more information please contact me Bruce Battersby by email on – Mitchells Roberton Solicitors in Glasgow.

Get on your bike!

Believe me when I tell you I have nothing in common with Norman Tebbit but, for entirely different and laudable reasons, I would coin his phrase and ask employees to “get on their bikes”. I am delighted to say that Mitchells Roberton has joined Cyclescheme, an initiative to encourage people to cycle to work. It is a super scheme. The health and environmental benefits are obvious but there are also significant financial incentives:

  • Reduced commuting costs
  • No parking costs – we are lucky that our offices at George House, North Hanover Street, Glasgow benefit from a secure and covered bike shed (and shower facilities!) – most places of work will have somewhere to park a bike at no cost.
  • Most significantly, employees typically save at least 30% on the cost of a new bike and accessories.

This is how it works:

  • The employer pays for a new bike & accessories (up to £1000) and retains ownership.
  • The employee hires the bike by a monthly salary sacrifice from their gross pay over an initial hire period (usually 12 months).
  • The employee then pays a nominal final amount (3%-7% of the initial cost of the bike) and after a secondary “hire” period (no further payments) ownership transfers to the employee.
  • The employee still earns the same amount. Deducting payments from gross salary rather than net salary is how the cost savings are achieved.

Most bike shops participate in the scheme and there are lots to choose from.

I joined the scheme recently and have been cycling to work since, so middle age and being dreadfully unfit are no barriers! My commute is about 4 miles and takes less than 20 minutes door to door. Glasgow’s roads are reasonably bike-friendly and there are extensive cycle lanes and paths to use. As I write my bike is in the courtyard waiting to be pedalled home.

Happy trails!

The Case of the Tumbling Lassie

An article in the Scottish Legal News of 29th June 2015 caught my eye. It refers to a case found by Alan McLean QC in a footnote of a law book, which case dates way back to 1647. It is about a child who had been “bought” from her mother and forced to work by a travelling showman. She performed as a gymnast , a stage attraction, known as  “the tumbling lassie”.

The girl had to dance “in all shapes” and “Physicians attested the employment of tumbling would kill her”. At that point the girl was taken in and cared for by a kindly couple.

The showman was furious and raised an action for damages against the couple saying that he had paid for the girl and she belonged to him.

The case is known as Reid v the Scots of Harden and there are handwritten notes on the case in the National Library of Scotland. The claim was dismissed by the judges at the Court of Session who reported “But we have no slaves in Scotland, and mothers cannot sell their bairns.”

Mr McLean was struck by this early upholding of human rights. He said “More than 325 years after Reid v Scot of Harden and his Lady, the “tumbling lassie” case, was decided in the Court of Session, it is astonishing, but true, that some people still live in Scotland as effective slaves, trafficked here on false pretences, threatened, trapped in menial work or worse, with their earnings withheld and their passports taken away. In other parts of the world, people languish in slavery because getting access to trained lawyers to uphold their rights- without which “the tumbling lassie” could not have been declared free-can be almost impossible.”

Arising from this Mr McLean and some of his colleagues have decided to raise funds to help fight modern-day slavery and have plans to organise a “Tumbling Lassie Ball.”

As Mr McLean concludes “ Lawyers , including judges, are among the “heroes of the piece…at the end of the day, people need lawyers to make their rights real.” I would agree.

E-Cigarettes In The Work Place

Action on Smoking and Health (ASH) in May 2015 estimated that 2.6 million adults in Great Britain currently use electronic cigarettes. Of these, approximately 1.1 million are ex-smokers while 1.5 million continue to use tobacco, alongside their electronic cigarette use. Yet electronic cigarettes are not subject to the ban on smoking in the work place introduced in Scotland in 2006, which only relates to lit substances.

E-cigarettes in the work place therefore pose a difficult question for UK employers. Should you treat them as if they are cigarettes or have different rules for their use?

I would advise all employers that it is crucial that they review their smoking policies for two important reasons.

Firstly employers must consider the health risks. E-cigarettes are indeed considered less harmful than conventional tobacco cigarettes and are used by some to help them quit smoking. However the health effects of e-cigarettes and passive “e-smoking” are not fully understood. There still remain question marks over the safety of second hand vapour which will certainly contain traces of nicotine and other toxic substances. Permitting e-smoking  in the work place may create the potential for future unwanted claims.

Secondly businesses must take note of a warning following the first employment tribunal case in the UK involving the use of e-cigarettes. The case focuses on a school catering assistant who was seen using an e-cigarette in full view of pupils. The headteacher reported the incident as smoking was not allowed on the premises. A disciplinary hearing was arranged but before it took place the catering assistant resigned claiming she had been constructively dismissed. The tribunal dismissed the claim but it indicated that if her employers had attempted to dismiss her on the grounds of gross misconduct, they would have faced the risk of a successful unfair dismissal claim as their smoking policy did not state that the use of e-cigarettes was prohibited.

It is clear that employers cannot rely on the legislation or their own policies that prohibit smoking to control the use of electronic cigarettes in the workplace and employers who decide that e-cigarettes should not be permitted must amend their non-smoking policies accordingly.

If I can help preparing an appropriate smoking policy for you or answer any questions please contact me by email or by telephone 0141-552-3422.

Clare’s Law is to be extended across Scotland

A trial scheme which allows people to be told if their partner has been violent in the past is to be extended across Scotland.

The trial scheme has been running in Aberdeen and Ayrshire for the past six months. In this period 59 applications were made for information with 22 people being warned their partners had a history of domestic abuse. Following on from the success of the trial Nicola Sturgeon announced that the scheme would be rolled out throughout Scotland later this year.

The initiative is called ‘Clare’s Law’ after Clare Wood who was strangled and set on fire by George Appleton, her violent and obsessive former boyfriend, in Salford, Greater Manchester in 2009.    Appleton had a history of violence and harassment against women which Ms Wood did not know about. Her father, Michael Brown, has been campaigning for people to have the right to ask for information about partners. He said “I very much welcome the national roll out of the disclosure scheme across Scotland. It is heartening to see the success of the pilots and to know that the people given these disclosures will now hopefully not be victims of domestic abuse.”

Clare’s Law : How to use it.

Any person can make an application about their partner if they are concerned that that partner may harm them; and any concerned third party (such as a parent, relative, neighbour or friend) can also make an application.

So what do you do?

  1. The first step is quite simply to contact the police. You can do this online, in person at a police station, by phoning 101 or by even speaking to a police officer in the street.
  1. At this initial contact with the police you will need to provide details about yourself and what prompted your enquiry. If when speaking to the police you allege a crime by your partner – for example- that your partner punched you- the police will investigate this as a crime and may arrest your partner. The police will run initial checks to establish if there is an immediate risk.
  1. You will then have a face to face meeting to complete the application. At this stage you will need to provide 2 forms of identification. The police will run more checks and speak to other services such as the Social Work Department and Prison Services. Once the police have gathered all the information available they will do a risk assessment to determine if anyone is likely to be harmed. The maximum amount of time from this step until potential disclosure should be 45 days.
  1. If the police do not think abuse is likely they will not make a disclosure. The information the police and other agencies hold on individuals is private and there has to be a pressing reason to share it.
  1. If the police feel that abuse is likely a multi- agency meeting will be held to consider disclosure and whether any disclosure is ‘lawful, necessary and proportionate’ to protect you from your partner.  If at the meeting a decision is made to disclose information, it will then be decided who should receive the information and a safety plan will be put in place to provide you with help and support. The person to whom the disclosure is made is not allowed to disclose this information to anyone else without the explicit permission of the police.
  1. If you request a disclosure about your partner, it is likely that you would be given any details directly. If a third party has requested a disclosure the police may well go straight to the victim of abuse to make the disclosure. This means the third party might not be told the outcome.

If I can help or you would like further information then please contact me by email or by phoning me on 0141-552-3422.

Book Review – American Wife by Curtis Sittenfeld


I read this novel with utmost surprise on two counts. I had expected a sharp political satire and instead found an almost forensic examination of a woman’s psyche and a patient and earnest character study. Secondly as a solicitor I wondered how on earth in this litigious age the author managed to get what is a barely disguised portrait of Laura Bush past her publisher’s legal department. Embellished with lost love, abortion, blackmail and a lesbian grandmother, the novel is daring, unashamedly commercial and potentially a legal minefield.

The first lady is cast as Alice Lindgren Blackwell who is a gentle, only child, born in the 1940s to impassive parents in a small Wisconsin town. The story describes Alice’s unlikely journey from small town ingénue to marrying rich alcoholic wastrel Charlie Blackwell who astounds everyone by becoming President of the United States.

The crux of the narrative comes before Alice’s country club marriage. She is haunted by the memory of Andrew Imhof a handsome boy she loved at the age of 17 but accidentally killed in a head on collision. An unhealthy relationship with the dead boy’s brother leads to pregnancy and an illegal abortion. Dr Wycombe, an eminent female surgeon with whom Alice’s Granny is having an affair performed the abortion-skeletons the wife of a Republican President cannot afford to have in her closet. Some 40 years later this feminist surgeon attempts to blackmail Alice.

More than a decade after Andrew’s death Alice dutiful, serious and thoughtful, now a school librarian and registered Democrat startlingly falls for and marries boisterous, charismatic Charlie Blackwell, the wealthy son of a bastion family of the Republican Party.

As Alice navigates her way through the strange rituals of the Blackwell’s country club and summer estate she remains uneasy with her newfound good fortune and when Charlie eventually becomes President  she is thrust into a position she did not seek-one of power  and advantage, duty and leadership.

Alice must now face contradictions. How can she both love and fundamentally disagree with her husband? What should she do when her private beliefs run against her public persona? How can she be a free thinker and yet an obedient wife and first lady? Indeed how did Charlie a middle aged frat-boy end up as president ?  But Alice supports her husband throughout his calamitous policies, with her face lift and Ferragamo shoes she becomes the embodiment of benign tolerance, burying her moral scruples with justifications of her conflicted state. As she says “I lead a life in opposition to itself.”

The novel is wonderfully written and succeeds in allowing the reader to continue to have affection for Alice even when her martyrish tendencies become frustrating and despite Alice being able to deceive herself about Charlie and being painfully aware that she often does so to maintain the status quo.

Above all Sittenfeld’s characters bring home the importance of accepting personal responsibility. While Charlie absolves himself as “an instrument of God’s will”, Alice reminds us that it is not so simple. “All I did was marry him….You are the ones who gave him power.”