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Changes to SDLT Filing and Payment Time Limits

Stamp Duty Land Tax (“SDLT”) is a tax on land transactions payable on the purchase of land or property (including leases) over a certain price in England.

The time limit for filing an SDLT return with HM Revenue and Customs (“HMRC”) and paying any tax due to HMRC is being reduced from 30 days to 14 days for those property transactions in England with an ‘effective date’ on or after 01 March 2019.

The ‘effective date’ is the date of completion; however, it may be brought forward where a contract has been substantially performed, for example, when a tenant takes early occupation of a tenanted property.

Improvements will also be made to the information to be provided in the SDLT return, and these will be in place when the new time limit begins (01 March 2019).

The Welsh Land Transaction Tax (“LTT”) replaced SDLT in Wales in April 2018. Under the LTT, the time limit for filing the return and submitting a payment to the Welsh Revenue Authority is 30 days from the effective date of the transaction.

The SDLT rules and LTT rules are complex, with many exceptions, exemptions, and reliefs. If your transaction is not straightforward you should take specialist tax advice to ensure that you pay the correct amount of SDLT or LTT (whichever applies).

Key Points on the Government’s Good Work Plan

At the end of 2018, the Government published details of its Good Work Plan, setting out its plans to introduce a number of reforms designed to improve protection for agency workers, zero hours workers, and others with atypical working arrangements.

The Good Work Plan is the Government’s considered response to Matthew Taylor’s report:  Good Work: the Taylor Review of Modern Working Practices, published in July 2017.

The main proposals included in the Good Work Plan are:

  • • Employment status clarification. The Government says it will bring forward “detailed proposals” as to how the employment status frameworks for the purposes of employment rights and tax will be aligned. There will also be legislation to “improve the clarity of the employment status test, reflecting the reality of modern working relationships”. This is a problematic area for employers and employees alike and has the potential to be a significant development, but the Good Work Plan is light on detail as to what this will involve.
  • • Extending the right to a statement of particulars to all employees and workers from day one. This right currently only applies to employees, and the statement can be provided up to two months after employment starts.
  • • Extending the relevant break in service for the calculation of the continuous service qualifying period from one week to four weeks. This is intended to help workers who work intermittently for the same employer and find it difficult to build up employment rights.
  • • Removal of the ‘Swedish derogation’ in the Agency Workers Regulations 2010 and banning this sort of contract from being used to withhold agency workers equal pay rights.
  • • A ban on employers making deductions from staff tips.

The Good Work Plan also includes proposals to improve the enforcement of employee rights, including:

  • • Introducing a ‘name and shame’ scheme for employers who fail to pay Employment Tribunal Awards.
  • • Implementing stronger sanctions for employers who have previously lost similar cases.

The Government has not given a timetable for introducing this legislation and, with the ongoing Brexit negotiations, may have other things on its mind for the foreseeable future. It is, however, useful to be aware in a general sense of what is likely to happen.

Brexit Notes: No-Deal & Consumer Rights

As 2019 dawned, there was hope in some quarters that a renewed commitment to common sense might have dawned with it and that our intrepid politicians might return to work determined to agree upon a way forward for Brexit. It is quite clear, not least in light of the House of Commons’ rejection of the Government’s Brexit deal on 15 January, that this is not to be.

Talk of ‘no-deal’ is far from new; however, for a long time, it has been reasonably easy to dismiss a no-deal scenario as unrealistic. Now, however, with less than three months before the UK leaves the EU, a no-deal Brexit is starting to look like a realistic possibility after all.

Opinions on a no-deal Brexit are wide-ranging and, of course, it is still entirely possible that the scenario will play out in some other way. Nevertheless, the Government has been making preparations for a no-deal Brexit, including the publication of a range of Technical Notices and an even broader range of draft secondary legislation.

In this post, we look at the impact of a no-deal Brexit on consumer rights in the UK and offer some comments on what this will mean for consumers and businesses in real terms.

No-Deal Brexit: The Basics

Before we get into the detail, it is as well to briefly outline exactly what ‘no-deal’ means. The UK is scheduled to leave the EU at 11 pm local time on 29 March 2019. If there is no deal in place at this point, EU law ceases to apply in the UK unless the UK has expressly adopted it. Unlike the alternative ‘deal’ scenario, there is no transition period within which EU law and the ‘four freedoms’ would continue to apply.

No-Deal Preparations for Consumer Rights

The Government has published a Technical Notice entitled ‘Consumer rights if there’s no Brexit deal’ and two draft statutory instruments: the Consumer Protection (Enforcement) (Amendment etc.) (EU Exit) Regulations 2018, and the Consumer Protection (Amendment etc.) (EU Exit) Regulations 2018.

In addition to the general changes outlined in this post, the Technical Notice also sets out some specific changes relating to package travel, timeshares, textile labelling, and footwear labelling.

The first set of regulations deal with cross-border enforcement while the second would implement the following changes:

  • • Limit the applicability of responsibilities set out in the Consumer Rights Act 2015 (currently applying to importers into the EEA) to importers into the UK;
  • • Put choice of law clauses referring to the laws of an EEA state on the same footing as those referring to non-EEA countries;
  • • Limit consumers’ rights to redress from importers engaging in practices prohibited by the Consumer Protection from Unfair Trading Regulations 2008 to importers into the UK (as opposed to importers into the EEA);
  • • Put users of EEA-based payment service providers on the same (less-protected) footing as users of payment service providers based in non-EEA countries; and
  • • Remove the current obligations on UK ADR providers to deal with disputes involving consumers resident in EU Member States. This would also end the operation in the UK of the European Commission’s Online Dispute Resolution Regulation for consumer Alternative Dispute Resolution.

Current UK consumer law is derived from EU law and, in the form of the Consumer Rights Act 2015, in fact provides better standards of protection than the ‘basic’ EU provisions. At least initially, therefore, UK consumer law and EU consumer law will be essentially the same. Cross-border enforcement would become more difficult in the event of a no-deal Brexit, however.

Put more simply, life for UK consumers would continue largely as normal, at least where their consumer rights within the UK are concerned. What would change is the ease of enforcing those rights if a trader is not based in the UK.

Cross-Border Enforcement and Dispute Resolution

At present, as an EU Member State, the UK’s consumer protection regime is supported by a reciprocal cross-border enforcement framework. A no-deal Brexit would mean the UK’s immediate departure from that framework.

Moreover, UK consumers would no longer be able to use the UK courts to take action against traders based in the EU effectively. Even if a UK court were to rule in a consumer’s favour in such a case, enforcing that ruling would be more difficult. By the same token, consumers based in the EU buying from UK-based traders could find enforcing their rights similarly difficult if we leave without a deal.

Access to alternative dispute resolution (‘ADR’) stands to be reduced. The European Commission provides an Online Dispute Resolution Platform for use in disputes between traders and consumers; however, a no-deal Brexit would mean UK-based traders and consumers no longer having access to it. Nevertheless, within the UK, the Government has said that it is taking steps to ensure that consumers and traders will still be able to use ADR for UK disputes. ADR obligations for businesses will not change; however, if your website makes any reference to the EU Online Dispute Resolution Platform, such references should be removed in the event of no-deal.

Final Thoughts

It goes without saying that regardless of how our departure from the EU proceeds, consumer rights will be affected in some way, but the impact of a no-deal Brexit could be more significant and would, of course, happen much sooner.

That being said, UK-based consumers and UK-based traders doing business within the UK should not need to be overly concerned and should expect the same rules that apply now to apply even if there is a no-deal Brexit. Those engaged in cross-border trading, however, should expect things to become less straightforward and prepare accordingly.

For consumers with questions about cross-border transactions in the event of no-deal, the UK’s European Consumer Centre will be available to help, and the Government has committed to funding the Centre for at least one year from April 2019.

From a business perspective, those selling only within the UK should not expect a great deal (no pun intended) to change. Those selling to consumers in EU Member States, however, must remember that, once the UK has left the EU (especially in a no-deal scenario), changes to EU consumer law will no longer necessarily be reflected in UK consumer law in the same way that they are now. In such cases, it will be important to keep up-to-date with EU law and the laws of any Member States sold into.

Do you trade with consumers in other EU Member States? If so, how are you preparing for Brexit, no-deal or otherwise? Are you expecting business to become more difficult or have you got it covered? As always, your comments are welcome!

 

[This post was edited on 16 January to reflect the outcome of the Meaningful Vote in the House of Commons on 15 January]

Fire Safety – Changes to Statutory Guidance – Approved Document B of the Building Regulations

Approved Documents are statutory guidance published by the Government on how to meet the Building Regulations for building work carried out in England only.

The Government has published changes to Approved Document B (Volumes 1 and 2) of the Building Regulations, which deals with fire safety. These changes come into force on 21 January 2019.

Approved Document B Volume 1 deals with dwellinghouses.

Approved Document B Volume 2 deals with buildings other than dwellinghouses.

The changes to Approved Document B seek to clarify the role of desktop fire safety assessments.

In the wake of the Grenfell Tower fire in 2017, a consultation took place in 2018 to consider whether the use of desktop assessments (in the absence of full fire safety tests) to assess fire safety regulatory compliance should be restricted or indeed banned entirely.

The amendments state that desktop assessments in lieu of tests are only to be used where necessary and are to be carried out in an appropriate way. Desktop assessments should not be used instead of tests where a test is necessary. Tests and assessments should be carried out by organisations with the requisite expertise and qualifications.

The Government has launched a Call for Evidence for a broader technical review on the guidance of fire safety (Approved Document B). Landlords, builders, developers, residents, and property managers are all invited to respond. The consultation closes on 1 March 2019.

Call for Evidence on Improving Building Safety

The Government has published a Call for Evidence – ‘Good practice on how residents and landlords/ building managers work together to keep their home and building safe’. Landlords, building managers, and residents are all encouraged to respond.

This Call for Evidence invites views on how residents and landlords/building managers work together to keep their buildings safe and ensure that all parties comply with their respective responsibilities.

The purpose of the Call for Evidence is to gather evidence to assess and examine the development of policy relating to resident and landlord/building manager engagement and collaboration in relation to fire and structural safety issues in the aftermath of the tragic event at Grenfell Tower. The aim is to ensure that there is a robust regulatory system for the future and to ensure that residential buildings are safe and remain so; however, it remains to be seen to what extent the Government will change the existing regime.

The questions are split into two sections, the first directed to residents, the second to organisations (landlords, building managers, and estate agencies, for example). Those who are both residents and landlords or managing agents should complete both parts of the questionnaire. Respondents are encouraged to respond through the online survey.

Responses must be given by 12 February 2019.

As a landlord or agent, do you find the existing regulations and arrangements allow you to manage fire safety risks in buildings effectively? Would greater collaboration between all parties involved make it easier to manage and ensure the safety of residential buildings?

Have your say in the Call for Evidence and share your thoughts with us below.

Elective and Cosmetic Surgery and Your Employment Policies

In November, we updated our Sickness and Absence Policy to include a section on elective and cosmetic surgery.

For these purposes, cosmetic surgery may be defined as surgery which is intended to improve a person’s appearance rather than their health. Elective surgery, on the other hand, refers to any surgery that is scheduled in advance, doesn’t involve a medical emergency, and does not have to be performed within 24 hours. Elective surgery can include cosmetic surgery.

Employers must be careful to observe strict confidentiality in respect of elective and cosmetic surgery. Clearly, employers cannot disclose information about any medical procedure without the employee’s consent. Communication is key here and, in some sensitive situations, it is advisable to agree in advance with the employee what will be communicated to colleagues.

All employees, including those who are undergoing elective and cosmetic surgery, are entitled to Statutory Sick Pay (SSP) when they are unfit to work provided that they follow the proper procedures and supply the appropriate certification. If employees are indeed unfit to work, and have provided the employer with the correct notice, SSP should be paid.

Contractual Sick Pay is, however, in the control of the employer and it is advisable to be clear about what the company policy is. Some employers may treat elective and cosmetic surgery in the same way as ‘ordinary’ sick leave but, if different arrangements apply, the company policy should be clear and applied consistently.

Employed vs. Self-Employed – Can You Spot the Difference?

A self-employed/independent contractor working arrangement has considerable attractions for both the employer and the self-employed worker, but it can be difficult definitively to identify the difference between employed and self-employed status.

HMRC provides helpful guidance that employers and workers can use to determine if an individual is an employee or self-employed and the key factors that determine whether a worker is an independent contractor depend on the tests of control, substitution and mutuality of obligation.

Control

If the client/employer specifically tells a contractor how to perform a task, what task to perform, when to perform it and where the task should be performed – known as ‘how, what, when and where’ tests – then the worker is probably controlled by the client and therefore an employee.

Substitution

If a contractor is required to perform the services himself/herself without being allowed to provide a substitute, then this, too, is an indication of employment.

Mutuality of Obligation

This is where an employer is obliged to provide work and the employee is obliged to perform the work. If a worker has to perform any task allocated by the client or employer then there is a mutuality of obligation and the worker is probably not an independent contractor.

In the case of a dispute, a range of factors are taken into account but these are the main ones.

With the rise of the gig economy worker, the situation has become even more complicated.

A Gig as a Plumber

Earlier this year, a gig economy worker status question came before the Supreme Court for the first time in the case of Pimlico Plumbers Ltd v Smith.   Its decision – that Mr Smith was indeed a worker and not a self-employed contractor as stated in his contract – follows the direction of travel set by other cases which have considered whether staff in the gig economy are workers, and so entitled to paid holiday and limited other rights, or genuinely self-employed and out of employment protection altogether.

Pimlico Plumbers Ltd v Smith concerned Mr Smith, a plumber working for Pimlico Plumbers, who claimed that the company had deprived him of a number of employment rights, such as paid holidays and sick pay, because it wrongly classified him as a self-employed contractor.  The background of the case was that Mr Smith had worked for Pimlico Plumbers Ltd for over five years and had a contract with the company which described him as an independent contractor.  Mr Smith was registered for VAT, submitted invoices, and filed tax returns on the basis that he was self-employed.  Mr Smith’s contract was terminated four months after he suffered a heart attack. He subsequently brought various claims in the Employment Tribunal and his employment status was considered as a preliminary issue. The Supreme Court has now upheld the rulings of the Employment Tribunal, Employment Appeal Tribunal (EAT), and Court of Appeal that Mr Smith was a worker, not an independent contractor. This decision is a significant one and means that Mr Smith can now proceed with his claims for unlawful deductions from wages, paid holiday, and disability discrimination.

In reaching a decision, the Supreme Court noted that Mr Smith took on a significant proportion of the commercial risk (i.e. he would not be paid in the event a customer failed to settle an invoice), provided his own tools and materials, was personally liable for his work, and was not supervised by the company. However, the facts considered by the court showed that Pimlico Plumbers had tight control over Mr Smith’s working life, which pointed away from Mr Smith being a truly independent contractor.

The following factors were particularly relevant to the Court’s decision:

  • • Mr Smith was required to carry a company identity card, wear a branded uniform, and use a Pimlico Plumbers-branded, tracked van leased from the company;
  • • Pimlico Plumbers had tight control over payment terms and the administrative aspect of all jobs;
  • • Mr Smith’s contract referred to ‘wages’, ‘gross misconduct’, and ‘dismissal’;
  • • Mr Smith was subject to post-termination restrictive covenants, including a three-month non-competition covenant;
  • • The terms of Mr Smith’s contract clearly pointed to an obligation of personal performance. Although he could appoint another Pimlico operative to do a job he had quoted for, but no longer wished to perform, this was more like swapping a shift than providing a substitute; and
  • • Mr Smith’s contract stated that the company was not obliged to offer him work and he was not required to accept work, but Mr Smith’s contract also stated he must work at least 40 hours per week for Pimlico. The working hours indicated a level of commitment to the company on Mr Smith’s part which was inconsistent with his self-employed status.

Although this is an interesting and significant case, the question of employment status is always tied closely to the facts of any given case, and it does not automatically follow, therefore, that other gig economy workers have employment rights.

More cases are due to be heard by courts and tribunals in the coming months and this should hopefully provide more clarity.  In the meantime, employers should ensure that they have written contracts in place that reflect the reality of the working relationship.  Here at Simply-Docs, we have a variety of documents covering a wide range of employer/employee and freelance working relationships accompanied by explanations of when the document should be used.  If in doubt, always seek professional advice.

Charities and Safeguarding

Recent High-Profile Safeguarding Incidents

This month we consider the important and sensitive issue for charities of safeguarding. There have been a number of fairly recent high-profile failures by charities to ensure adequate safeguarding. In early 2018, the Department for International Development called for assurances from aid charities in the light of the Oxfam scandal relating to its work in Haiti. In response, charities reported over 80 serious safeguarding incidents to the Charity Commission. Overall, in the weeks after the Oxfam scandal broke, more than 500 reports of serious incidents involving safeguarding were received by the Commission.

What is Safeguarding?

“Safeguarding” means taking a range of measures to protect people in a charity, or those it comes into contact with, from abuse, maltreatment or other harm of any kind. (This includes physical, sexual, emotional, discriminatory, institutional or organisational, financial or material abuse, neglect, or impairment of the health or development.) For a full definition of safeguarding, see The Care and Support Statutory Guidance issued under the Care Act 2014.

Charity Trustees’ Legal Duty

All charity trustees have a legal duty (“safeguarding duty”) to take reasonable steps to protect their charity’s beneficiaries, staff, volunteers, and those connected with the activities of the charity from harm. The Charity Commission has stated that safeguarding should be a key governance priority for all charities, regardless of size, type, or income, not just those charities working with children or vulnerable adults.

Adopting a Safeguarding Policy and Other Steps

The Commission has also stated that it is essential for charity trustees to have and implement a safeguarding policy and procedure.  Adopting and implementing a safeguarding policy and procedure assists charity trustees in discharging their safeguarding duty. With this in mind, we maintain a template Safeguarding Policy in our Charity & Non-Profit Group. In any event it is good practice to have such a policy.

Adopting such a policy is one of ten action points which the Commission recommends to ensure good safeguarding governance. The other action points include identifying possible risks, improvement of safety culture, communicating within a charity how to follow up any safeguarding concern, keeping safeguarding training current and relevant, and carrying out risk assessments. The Commission sets out these action points in more detail here, and we urge you to implement them if you are a charity trustee.

Safeguarding also entails other actions, including ensuring that trustees and others recruited to the charity are not disqualified from being appointed to the role in question, and that DBS checks (and enhanced checks) are carried out as appropriate.

More generally, trustees must make sure that their charity’s assets are used only to support or carry out the charity’s purposes. Trustees must not expose the charity’s assets, beneficiaries or reputation to undue risk.

Children and Vulnerable People

Safeguarding is a particularly important and sensitive issue for you as a charity trustee if your charity works with children or vulnerable people. People may use your charity to get to children, vulnerable people, or their records for inappropriate or illegal purposes. You must be alert to this and actively manage the risk that your charity may be deliberately targeted, that its culture may allow poor behaviour to take place, or that people in a position of trust may abuse this. It is also important to carry out checks on any organisation, including an overseas organisation, that has contact with children or adults at risk before your charity gives them funding.

What is Your Risk as a Trustee?

You can be held responsible for any consequences or loss that your charity incurs if you do not discharge your safeguarding duty. When the Charity Commission looks into whether there has been a breach of trust or duty, or other misconduct or mismanagement by trustees, it can take into account whether they followed safeguarding practice.

Prevention, Not Cure

Safeguarding failures can adversely affect a charity’s reputation but there is a built-in conflict of interest for charities in that they are bound to properly report serious incidents to the Charity Commission. However, if they do so and the full nature of the incident only becomes public knowledge because of that reporting, their reputation may be sullied and they can lose grant, donor, and other funding as a result.

Our message, therefore, is that prevention is better than damage limitation: if robust policies and procedures are implemented, the occurrence of such incidents is more likely to be deterred. This should produce, in terms of morality, the most important consequence, i.e. improvement in the behaviour of all connected with the charity. As a by-product, a charity’s reputation is preserved and its funding is not adversely affected.

Charity Trustees’ Conflicts of Interest

Trustees’ Legal Duties

The role of a trustee of any charity (“trustee”) is an honorary one, i.e. it is unpaid, and it is often supposed that trustees therefore have few or no legal duties. This is far from the actual position.

All trustees have numerous legal duties, as outlined in our Guidance Note on Charity Trustees’ Duties, Responsibilities, and Liabilities. For example, every trustee must not accept any personal benefit from being a trustee unless legally authorised, must act in the best interests of the charity, manage conflicts of interest, administer the charity properly, safeguard its assets, act prudently, act with care, act collectively, and ensure restrictions on funds are observed. In this post, we focus on one of those duties: the duty to manage conflicts of interest.

What is a Conflict of Interest?

A “conflict of interest” is defined by the Charity Commission in its 2014 guidance on managing trustees’ conflicts of interest as ‘any situation where the personal interests or loyalties of a trustee could, or could be seen to, prevent them from making a decision only in the best interests of the charity’ of which they are a trustee.

A conflict could arise where a trustee might gain a personal benefit in a situation, e.g. a financial benefit or pecuniary interest. It might instead arise where they have a competing loyalty to another organisation or person. A trustee has a “fiduciary” duty to their charity; this means that in law they have a relationship of trust and confidence with it which imposes a duty of loyalty. Case law emphasises that they must have “single minded loyalty” to their charity, i.e. it is exclusive, and not dilutable. An example of a conflict of loyalty would be where a trustee simultaneously holds a trustee role with another charity since that other role gives rise to the same duty to maintain “single minded loyalty”.

A conflict of interest between duties to the charity and some other interest can cover any type of duty, obligation, transaction, interest, situation, or receipt of information which creates a conflict with his duties as trustee.

Further, the trustee need not be the person directly gaining the benefit in order for them to have a conflict: if a person “connected” with the trustee may gain a benefit, this will also give rise to a conflict of interest for the trustee. Persons “connected” include family members, relatives, business partners, or businesses in which the trustee has an interest.

What is an “Interest”?

Here are some examples of categories of “interest” which (depending on the circumstances) might give rise to a conflict. These are only some examples, and something else may also be an interest although not covered below. The “person” below means either the trustee or a person connected with them:

  • • Current employment and any previous employment in which the person continues to have a financial interest.
  • • The person’s other appointments (voluntary or otherwise) e.g. trusteeships, directorships, local authority membership, tribunals. (Where, for example, they are also a trustee of another charity that is competing for the same funding, that would be a conflict.)
  • • The person’s membership of any professional bodies, special interest groups or mutual support organisations.
  • • The person’s investments in unlisted companies, partnerships and other forms of business, shareholdings exceeding the percentage set by the charity, and beneficial interests.
  • • Gifts or hospitality offered to the person by external bodies.
  • • Where the person uses, or cares for a user of, the charity’s services. (There would be a conflict in those circumstances where, for example, the trustees are discussing whether fees for service users should be increased.)
  • • Where the person has any contractual relationship with the charity.

There is no conflict of interest where a trustee also acts as a volunteer with the charity or donates money to it.

How Must Conflicts of Interest be Managed?

Trustees have a legal duty to manage conflicts of interest correctly, not a duty to avoid a conflict arising. We recommend that you familiarise yourself with the Charity Commission’s 2014 guidance on management of conflicts. It sets out a three-step approach as follows:

(1) Trustees should declare their interests.

Trustees each have an individual personal responsibility to declare conflicts of interest which affect them. Trustees should also provide a full disclosure on appointment of their interests which could potentially result in a conflict of interests so that consideration can be given to their suitability for appointment prior to their appointment. They should keep their disclosure updated at least annually and when any material changes occur. Trustees should also declare any gifts or hospitality received as a trustee that could potentially result in a conflict of interests – it is good practice for a charity to maintain a policy on the subject.

A trustee board should ensure that the charity has strong systems in place (including maintaining a register of the trustees’ interests) so that the trustees are able to identify conflicts of interest. The trustee board should have a standard agenda item for board meetings requiring trustees to declare any actual or potential conflicts of interest at the beginning of each such meeting. A trustee should declare any interest which he or she has in an item to be discussed at a board meeting, and should do so at the earliest possible opportunity, and certainly before any discussion of the item itself.

(2) Trustees should consider removing a conflict of interest.

They must consider the interest so that any potential effect on decision-making is eliminated. Where there is a serious conflict, the trustees may need to remove the conflict by not pursuing a course of action or by proceeding with the issue in a different way so that a conflict of interest does not arise or by not appointing a particular trustee or by securing a trustee resignation.

(3) Where trustees decide not to remove the conflict, they must instead prevent it from affecting their decision by following any specific requirements in the law or the charity’s governing document (i.e. its constitution) which deal with conflicts of interest and how they should be managed.

Trustees should also follow any conflicts of interest policy that the charity has adopted.  Alternatively, where there are no specific governing document or legal provisions, they must require a conflicted trustee to declare their interest at an early stage and, in most cases, withdraw from relevant meetings, discussions, decision making and votes, or they may consider updating their governing document to include provisions for dealing with conflicts of interest. They may instead, exceptionally, seek the authority of the Commission where the conflict of interest is so acute or extensive that following these options will not allow the trustees to demonstrate that they have acted in the best interests of the charity. Trustees should formally record any conflicts of interest and how they were handled, and must, if they prepare accruals accounts, disclose any trustee benefits in the charity’s accounts.

The Commission recognises that it is good practice for all charities to adopt and use a conflict of interest policy. We have included two template Conflict of Interest Policies in our Charity & Non-Profit Group for that purpose.

Consequences of Failing to Declare and Deal Properly with a Conflict of Interests

Where there is a conflict of interests which has not been properly managed, that will be a breach of the trustees’ legal responsibilities, and a trustee board decision made against that background could be contrary to the charity’s best interests or could impact negatively on its reputation, public trust or confidence in it. Such a decision could be legally invalid and/or challengeable.

The failure to manage conflicts of interest could result in a trustee having to repay the charity for any loss caused by their breach of trust, to account for any unauthorised benefit that the trustee may receive, or the reversal of a disposal of charity property where there has been a conflict of interest even though the trustee did not receive any personal benefit.

Comments on Conflict of Interest in Practice

Conflicts of interest can and do arise. It is a common issue especially in smaller charities.  The existence of a conflict in itself does not mean that anyone has acted improperly: it is how you manage it that is important.

Although the legal requirements relating to managing conflicts of interest should be understood and met by all trustees of all charities, it is all too common in practice that trustees overlook, and in some cases wilfully ignore, their duty to properly manage or avoid conflicts of interest.

Failure to deal with a conflict can easily often happen where a trustee has competing duties of loyalty between their charity and some other organisation. It is all too easy to overlook competing loyalties, and that may well be because trustees do not derive any personal (tangible or other) benefit where they have such a conflict.

Perhaps the best guiding principle that trustees should be aware of and follow is that a charity trustee can never serve two masters, and that the trustee board needs to be very wary even where in a particular situation they perceive that the conflict of loyalty that one of their number has poses a low or no risk to decision-making in the best interests of the charity.

A failure can also often happen where a trustee has a personal potential financial or measurable benefit, for example if the charity sells assets to a trustee or acquires assets from them, or pays a trustee either for their trustee role or for providing services to the charity, or employs a trustee or a relative of the trustee, or where a beneficiary of the charity is also one of its trustees.

Have you had any experience of a conflict of interest arising at your charity, and if so how did you deal with it? Have you ever contacted the Charity Commission for advice about a conflict of interest? We would like to hear about how your charity resolved a conflict of interest situation.

HMO Reforms From 1 October 2018

New rules relating to houses in multiple occupation (HMOs) apply from 1 October 2018. The key reform is the extension of mandatory licensing of HMOs. There are also new provisions regarding minimum room sizes and the management of household waste. Criminal and civil penalties can be imposed for non-compliance.

Extension of Mandatory Licensing

In simple terms, a house or flat is an HMO if it is occupied by three or more tenants who form two or more households and the tenants share some or all of the toilet, bathroom, or kitchen facilities.

Mandatory licensing applies to “large” HMOs, meaning those that are occupied by five or more people. A large HMO no longer needs to have three or more storeys to come within mandatory licensing.

Mandatory licensing will also now apply to purpose-built flats where there are up to two flats in the block and one or both are occupied by five or more people in two or more households. Each flat, if occupied as an HMO, will require a separate licence.

National Minimum Room Sizes

From 1 October 2018, HMO licences will specify which rooms in an HMO are suitable for sleeping accommodation, and by how many adults and children.

A room for a single adult or child aged 10 or over must have at least 6.51m2 of usable floor space. A room for two adults or children aged 10 or over must have at least 10.22m2 of usable floor space. A room with a usable floor area between 4.64m2 and 6.5m2 may be occupied as sleeping accommodation by a child under the age of ten.

Household Waste Management

For HMOs in England (but not in Wales), a licence granted on or after 1 October 2018 must include conditions requiring the licence holder to comply with any scheme provided by the local housing authority relating to the storage and disposal of household waste at the HMO pending collection. Schemes will vary from area to area but the idea is to require landlords to provide appropriate and sufficient refuse storage facilities for tenants.

Failure to Comply with HMO Legislation

There are serious consequences for landlords and letting agents who do not obtain licences for licensable properties, or who are in breach of licence conditions. These include unlimited fines for criminal offences, civil penalties of up to £30,000, rent repayment orders and, for persistent non-compliance, the possibility of a banning order being made against the landlord or agent. However, in relation to room sizes the local authority will allow landlords a period of time (up to 18 months) to rectify a breach.

How Do These Reforms Affect You?

Are you a landlord or tenant or local authority affected by these reforms? What steps have you had to take to prepare for 1 October? Will the new rules have the desired outcome of improving the standard of HMO accommodation? Please share your thoughts with us.

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