W H writes: I have recently bought a new business with a small number of
employees, whose contractual terms differ from those of the people I already
employ. What legal issues are involved in relation to their rights and
employment contracts? What other responsibilities will I inherit with the
new employees?
Under the Transfer of Undertakings Protection of Employment Regulations 2006
(TUPE), employee rights are protected when you buy a business, or even sell
it on, writes Peter Done, managing director of Peninsula. Most commonly,
employees keep the same rights, terms and conditions. TUPE applies to
transfers of large and small businesses, though there are some exceptions.
As well as transferring to you on the same terms and conditions, staff will
also have continuity of employment. You will have taken over their contracts
of employment immediately before the business was transferred to you. If an
individual does not co-operate and refuses to be transferred, his contract
is terminated by resignation and in this case the worker is not classed as
being dismissed.
You cannot change the terms and conditions of the transferred employees to
make them the same as those of your long-standing workers. This would be
seen as possible constructive dismissal, allowing an employee to take you to
a tribunal.
If you change employees’ terms and conditions for the worse simply because of
the transfer, they can resign and claim constructive dismissal.
However, if the proposed change is unconnected with the transfer, it can be
handled like any other change. This should be done only if absolutely
essential and you should take professional advice.
Effective consultation between you and the two workforces will lead to a
better work environment for all concerned.
Best to buy on hire purchase
P S writes: I run a small specialist printing firm. We are planning to
acquire new equipment and can either purchase it outright or lease it. The
cost of the equipment is high and this will be a substantial outlay for my
small business. Would I be able to deduct the costs of the machinery from my
income for tax purposes?
The tax treatment of the equipment would depend on whether you bought it or
leased it, and this can affect your cash flow and the real cost of the asset
to you, writes Jon Sutcliffe, partner at Kingston Smith LLP.
If you buy assets, you may be eligible for capital allowances that can be
deducted from profits. The capital-allowance regime has recently undergone a
series of changes, and for many small firms these are likely to mean that
buying assets, rather than leasing them, will be the most advantageous route.
From April 2008 each group of companies has an annual investment allowance
(AIA) of £50,000. With certain exceptions (notably cars), plant and
machinery expenditure of up to £50,000 a year is now fully deductible
against profits. Any spending above the AIA will be put in a pool, and a
writing-down allowance will be available each year as a deduction against
profits.
Most equipment attracts writing-down allowances at 20%, but integral features,
such as electrical systems, are now eligible for writing-down allowances at
a reduced rate of 10%. If you lease the printing press, the charges will be
spread evenly over the period of the lease. These can be deducted from
profits over the same period.
You could buy the printing press with hire-purchase finance. You would make
monthly payments comprising both interest and capital elements. The interest
elements would be deducted from profits as they arose. Capital allowances,
however, would be available on the asset at the start of the contract. In
this way, a hire-purchase agreement is likely to be a way of obtaining both
the tax advantages of purchasing an asset outright, and the cash flow
benefits of leasing the asset.
Kingston Smith LLP, the chartered accountant, and Peninsula, the
employment-law firm, can advise owner-managers on their problems. Send
questions to The Business Doctor,The Sunday Times, 1 Pennington Street,
London E98 1ST, or fax to 020 7782 5765. Advice is given without legal
responsibility.
