Corporate newsletter February 2008
Companies Act 2006 – are you ready for 2008?
We have previously issued a set of briefing notes summarising the key changes in Company legislation which were to take effect from the 1 October 2007 under the Companies Act 2006 (CA 2006).
The last of the proposed changes were due to come into force on 1 October 2008. However, the Government has recently postponed these until 1 October 2009.
Companies may have already made changes to their articles in light of the changes now in force under the CA 2006 and may need to make further amendments to their articles still. We recommend that a further review of articles is undertaken once the complete set of provisions under the CA 2006 are implemented by October 2009.
Reform of capital gains tax
In the previous edition of this newsletter, we highlighted the changes in capital gains tax (CGT) which were introduced in the Pre-Budget Report 2007. The government has subsequently made some amendments to these changes. These changes come into effect in April of this year.
What are the changes?
A complete alteration of the CGT system from 6 April 2008 including the abolition of taper relief and replacement of the current multiple rate structure with a flat rate of 18%.
The Government has made subsequent changes through the introduction of a new relief for entrepreneurs. This is targeted at owners of small businesses when they sell their business. The most significant parts of the relief are: 10% tax rate for sales of assets up to the first £1million of lifetime capital gains.
What is the impact of the changes?
Clearly the move to a single rate of 18% would have been disappointing for individuals who had held shares for at least two years in unquoted companies because the CGT payable on the sale of these shares would have increased from 10% to 18% from 6 April 2008. The new entrepreneur’s relief will mean that we will no longer see a rush of small firms being put up for sale before April in an attempt for people to beat the deadline.
The relief will be particularly beneficial for shareholders who have held their shares for less than two years. They will be in a better position once the new rules come into effect and therefore would be well advised to defer any planned disposals until after 6 April 2008.
The introduction of the relief also means that the new CGT system is much less likely to stifle entrepreneurial spirit and create a reduction in the number of start up businesses, which it was felt would have been the situation if there were no relief.
One area which is still a concern is the position of employees who own shares in their employer. Most employees will not meet the minimum shareholding requirements outlined above and so are likely to bear 18% tax on any gains arising after 6 April 2008.
The proposals will impose additional compliance burdens in keeping track of lifetime gains, as the point at which individuals would be taxed at the 18% rate as opposed to the 10% rate is dependent on the value of their total cumulative gain through their lifetime.
For more information email Ashan Arif. aarif@clarkslegal.com
Car manufacturers soon to lose design protection for car parts
Drivers taking their car into the garage in order to get their car repaired could soon find that the cost of repair is cheaper after a recent vote passed by the European Parliament.
What are the changes?
Currently car manufacturers have the exclusive right to sell visible spare parts for their cars such as bumpers, bonnets and headlights. However, this is soon to change as proposals put forward by the European Commission, to end the exclusivity currently enjoyed by car manufacturers, have recently been accepted by the European Parliament. The proposed changes are part of a move aimed at bringing down prices in the repair market where the Commission felt that competition was currently insufficient.
It is proposed that EU countries will have a five year transition period before the changes are fully implemented.
What is the effect of these changes?
Suppliers will be able to produce motor vehicle components which are identical to the original parts without infringing design protection.
Car manufacturers would still retain design protection for spare parts purchased for decorative reasons, i.e those spare parts which change the original appearance, as the proposed Directive would not apply to these parts.
Invisible parts of the car, such as parts of the engine are also not covered.
This opening up of competition is good news for the consumer wanting to get their car repaired, as they will get more choice as to who to buy the spare part from and at a cheaper price.
At present there are differences in national legislation, whereby some EU countries still have design protection for spare parts, some countries allow spare parts for repair and replacement to be sold in the after-sales market and in Greece, spare parts have design protection for five years. The changes will mean that there will be harmonisation of design protection rules across EU member states within the spare parts market.
The critics
One important issue to note and a point which has been highlighted by Malcolm Harbour, UK MEP, is that these changes in design protection do not in any way undermine the importance of intellectual property (IP) protection.
Many feel that the change strikes a fair balance between intellectual property protection and the need for competition in the aftermarket for vehicle repair. One argument is that IP protection would be even more important once car manufacturers lose their monopoly in this market, as it would become even more important than ever, to distinguish your goods.
Unsurprisingly, car manufacturers are strongly opposed to the EU plans to put an end to their exclusivity, arguing that the changes would lead to job losses in a market which is valued at 10 billion euro a year. They also warned that the proposal would lead to lower safety standards in the market. However, the Internal Market Committee have said that existing legislation, which requires independently manufactured parts to be tested to the same standards as the car manufacturers own parts will apply, thereby guaranteeing that high safety standards are maintained within the market.
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