Tier 2 of the points-based system of immigration – Skilled Migrants (General) – is the route which enables UK employers to employ nationals from outside the resident workforce to fill a particular job that cannot be filled by a settled worker.

Before issuing a certificate of sponsorship, one of the requirements for employers is to ensure that the vacancy filling process complies with the ‘resident labour market test’. To this end, since 31 March 2009, vacancies under this Tier must first be advertised to settled workers with the government agency Jobcentre Plus and via one other advertising method permitted by the relevant code of practice. There is an exception to the rule with regard to vacancies for jobs that fall under the Standard Occupational Classification SOC 1112. The UK Border Agency (UKBA) recognises that Jobcentre Plus is not a suitable agency with which to advertise very senior roles, but all other resident labour market test requirements, as set out in the relevant code of practice, must still be met when filling such vacancies.

The Government has announced that from 14 December 2009 the resident labour market test will be extended to four weeks for all jobs. Currently, the requirement is to advertise a post for two weeks, or one week where the salary is £40,000 or more.

The change will apply to advertising campaigns which start on or after 14 December. Employers that have already run advertisements will not need to re-advertise to meet the new requirement.

The four-week period need not run continuously. Where it is envisaged that resident workers will be readily available, the job can initially be advertised for a shorter period. Only if there are no resident workers available to fill the vacancy will it be necessary to advertise for a further period.

Updated guidance for Tier 2 sponsors will be published on the website of the UKBA (http://www.ukba.homeoffice.gov.uk/) on 14 December.

In addition, the Government has accepted in full the recommendations of the Migration Advisory Committee for a revised shortage occupation list for Tier 2 of the points-based system of immigration. The list will apply to all certificates of sponsorship assigned on or after 14 December 2009. Applications based on certificates of sponsorship assigned before this date will be considered against the shortage occupation list in operation at the time.

The revised list can be found at http://www.ind.homeoffice.gov.uk/sitecontent/documents/news/Revised-shortage-occ-list.pdf.

Landlord Pays Price for Failing to Inform Tenant
If a landlord has concealed or misrepresented facts, it can be ordered to pay a departing tenant compensation for any damages or loss sustained by the tenant that arise as a result of having to quit the premises.

The legislation bringing this into effect is relatively new and the first case in which it has been put to the test was only decided recently. It involved a landlord which gave notice to its tenant that it wished to refurbish the premises and that it was necessary for the landlord to obtain vacant possession of the premises to carry out the proposed works. This is one of the reasons for which a landlord can oppose the grant of a new lease to a tenant.

The tenant’s lease was scheduled to come to an end in January 2007 and the landlord’s notice was served in August 2006. The tenant offered to increase the rent payable to the landlord in exchange for a new lease, but the offer was refused by the landlord.

The landlord then changed its mind about the redevelopment and, in October 2006, it instructed agents to market the premises for let. The tenant was not informed of this and signed a lease on new premises in November 2006, vacating the old premises the following month.

When the tenant became aware of the fact that the landlord no longer intended to carry out the refurbishment of the premises, it sought compensation. The court took the view that the landlord had correctly stated its intentions at the time and had no obligation to inform the tenant of its change of mind. Accordingly, the tenant lost. The tenant then appealed the decision to the Court of Appeal.

The Court of Appeal considered that a landlord’s conduct could give rise to a misrepresentation or concealment. The landlord’s notice had referred to the statutory process whereby a tenant is required to vacate premises at the end of a lease because of the landlord’s formal opposition to the renewal of the lease. Accordingly, the representation made was either a continuing one or one which became false and thus created a duty to inform the tenant of the changed circumstances.

This case is important for landlords as, in similar circumstances, failing to notify a tenant of a change in intention after the tenant has been informed that its application for a new lease will be opposed may lead to a claim.

VAT and Exports – Prove It or Lose It
Small items of high value have always represented a major problem for HM Revenue and Customs (HMRC), since they are the favoured means by which criminals commit a simple VAT fraud. In essence, the fraud works by producing evidence that goods have been purchased or imported (which leads to a recoverable VAT charge) and then exported (so they are zero-rated on sale). The net effect is that the VAT incurred on purchase or import is recovered. Normally there is a chain of businesses involved and, at some point, one of them ‘disappears’ having not paid the VAT due. The net result is that VAT is paid out by HMRC and this is never balanced by VAT paid to HMRC. IT equipment of various sorts and mobile phones are favoured items to use in what are described as ‘missing trader’ or ‘carousel’ frauds (the latter because the same goods can go round and round in circles, being used to commit several frauds).

Needless to say, HMRC are often very picky about the evidence of exportation they will accept as valid. Recently, they brought to court a claim for zero-rating of goods which it had been claimed had been exported. The case illustrates how HMRC can create problems for businesses which appear to be innocent parties in a chain of transactions that HMRC believe to be suspect at some point in the chain, and it sounds a warning bell for businesses that export goods.

HMRC argued that the company’s evidence for export was inadequate. The VAT Tribunal agreed, partly because the company had taken no steps to make sure it was not involved in any fraudulent transactions.

The exporter appealed, arguing that the Tribunal was wrong. The Tribunal had concentrated on the company’s lack of effort to make sure the transactions were not fraudulent. The company also argued that as it held a CMR consignment notice as evidence of export and this had initially been accepted by HMRC as valid, HMRC could not later refuse to accept its validity. Furthermore, HMRC had not accused the company of fraud.

The court sided with HMRC: the Tribunal’s decision that there was inadequate evidence of export of the goods must stand. Case law held that possession of a CMR consignment notice could not be regarded as conclusive proof of export.

It is absolutely critical for exporters to make sure their documentation is adequate to support their claim that goods have been exported and thus qualify for zero-rating for VAT purposes.

Floor Area VAT Claim Succeeds
Where a business undertakes activities on which VAT is chargeable (at the standard, reduced or zero rate) as well as those that are exempt, there are often problems in ascertaining how much input VAT relates to the exempt activity and is thus not recoverable as input tax.

In practice, a variety of methods are in use to apportion expenses for the purposes of calculating the recoverable VAT. A common one in the case of business premises is to make an apportionment on the basis of the floor area used for each type of activity.

In a recent case, a gambling club sought the agreement of HM Revenue and Customs (HMRC) to an apportionment method which was based on the area used for gaming (broadly exempt) and for catering (standard-rated). HMRC argued that the proper method to use would be one based on the turnover of each part of the business. This method would increase the club’s VAT liability.

This sort of argument normally proves successful for HMRC, but in this case it did not. The Tribunal accepted the club’s contention that the costs which had to be apportioned between the two activities were mainly related to the property and that floor area was therefore a more accurate method of apportionment to use than turnover.

Diet Plan Loses More Than Weight
When items of mixed VAT status (e.g. when one is exempt or zero-rated and the other is standard-rated) are supplied together, the VAT treatment can be complicated. Where the two supplies are in effect inseparable, they become a ‘composite supply’, the VAT status of which is normally determined by the dominant supply. Typically, HM Revenue and Customs (HMRC) will argue that the correct treatment is the one which means they collect the most VAT.

In a recent case, a business that supplied a weight-loss system, which included counselling and support as well as specialised foods, argued successfully before the VAT Tribunal that there were two separate supplies being made: the standard-rated supply of support services and a zero-rated supply of food. HMRC appealed and was successful. The Court of Appeal agreed with HMRC’s argument that there was a single (standard-rated) supply and it would be artificial to split the supplies into two for VAT purposes.

This is the sort of case which could probably have been avoided altogether had the way the business dealt with its customers been considered from a VAT perspective at the outset.

Companies Act Model Articles – Think Before You Leap
The Companies Act 2006 came into effect fully on 1 October 2009.

One of the advantages of the Act is that it has made the incorporation of a company easier by creating a new and simplified set of model articles of incorporation.

However, before you rush off and buy an ‘off the shelf’ company, pause to consider this – it is usually much more sensible to start with the right articles than to amend ‘standard’ articles to say what you mean later.

Articles tend to be of little importance to directors and shareholders until the company has ‘grown up’ a bit – by which time vested interests can be strong and changes to the internal regulations, such as alteration of share capital rights and so on, can be difficult and full of hidden pitfalls. These sorts of issues can prove a disaster when there are discussions ongoing relating to the retirement of director-shareholders or a proposed purchase of the business or of a shareholding in it.

Companies Act Changes Afoot
The Companies Act 2006 is, at 761 pages, the longest Act of Parliament in British history and was only fully implemented in October. However, changes are already afoot! Apparently, the sections of the Act which require disclosure of share capital (the ‘statement of capital’ in the Act) have been recognised as being too difficult for some companies to comply with – so a consultation exercise has been launched by the Department for Business, Innovation and Skills (BIS) to consider how the Act may be revised.

More details can be found on the BIS website at http://www.berr.gov.uk/consultations/page53695.html.

Intellectual Property Insolvency Clause Unfair
It is common for a contract to be written so that if one party to it becomes insolvent the contract ceases, but when the contract relates to the creation of something of value to both parties and this is jointly owned, the situation can become more complicated.

In a recent case, the BBC undertook a joint venture agreement (JVA) with a company (part of the Woolworths group) which became insolvent. The JVA created a licence to intellectual property rights, which formed a considerable proportion of the value of the licence. The contractual terms provided that the JVA was terminated if a partner became insolvent and in practical terms meant that the solvent partner could force the insolvent partner to transfer its shares in the joint venture at a substantial undervalue.

The company’s administrators contested the agreement on the basis that its effect was to deprive the creditors of the company of the value of the licence rights. The High Court agreed, in a long and rather complicated judgment, holding that the agreement was contrary to public policy.

It is important when drafting clauses in any agreement to ensure that they are not too one-sided or do not result in unfairness. Such clauses may themselves be unenforceable or render an entire agreement unenforceable.

Employee Who Took Employer’s Intellectual Property Faces Court Wrath
An employee who left a conference business and who ‘borrowed’ his former employer’s database, transferred one of its trading names to use for his own purposes and made use of some of the same conference speakers (asking them to speak ‘again’ at conferences he was organising, giving the impression that his business was the same business) found the court unimpressed recently.

It allowed an injunction against the ex-employee and accepted claims for breach of confidence, infringement of database rights and passing off (which is where a business represents itself to be another to benefit from the other business’s good name) from his former employer.

The ex-employee, whose website described the Anglia Polytechnic University graduate as a graduate of ‘Cambridge’, faces a substantial, but as yet unquantified, claim for costs and damages.

Intellectual property developed whilst working for someone else belongs to the employer, unless there is an agreement to the contrary.

Landlord in Administration – Tenant Cannot Be Left in Limbo
In periods of economic uncertainty, it is not only tenants that suffer financially but landlords as well. A recent case highlights the fact that the courts would be wrong to improve the position of a landlord or bank by prejudicing a tenant.

A new lease application made by Somerfield Stores Limited was opposed because the landlord wanted to redevelop the property. As the landlord then went into administration, the lease application, a ‘legal process’, could not continue without the permission of the administrator or the court.

The administrators refused permission on the grounds that they wanted to explore the viability of development to enhance the value of the property, although they could not assert that they had an actual intention to develop. When Somerfield wished to refurbish the store, it was left in a state of uncertainty.

Albeit the landlord was no longer in a position to redevelop the property, any such development would benefit the interests of the bank, but not the unsecured creditors. The court ruled that the administrators should not improve the position of a secured creditor over the interests of a third party, as it was not in the interests of the creditors as a whole.

Somerfield, like any other applicant to the court, had a right to have its application heard without undue delay and, as things stood, had a right to a new tenancy. The court allowed the lease application to continue.

Data Protection Fine Proposals and Direct Mail Cull
The Government has announced that it intends to levy fines of up to £500,000 (yes, £1/2 million) for serious breaches of the Data Protection Act 1998 (DPA).

Worrying as that may be for businesses, a recently-launched consultation could have a greater negative impact on many firms. It proposes to abolish or reduce the right of access to the edited version of the electoral register maintained by councils. This is widely used as a source of information for the construction of databases for direct marketing purposes.

Will Your Premises Be Shown The Yellow Card?
Following an evaluation of the impact of the Licensing Act 2003, the Department for Culture, Media and Sport announced earlier this year that it would be introducing a card alert scheme designed to give licensing authorities which chose to adopt it a new method of cracking down on violations of licensing conditions and excessive drinking. Some local authorities have begun adopting the scheme, under which ‘yellow cards’ can be given in order to apply tougher licensing conditions. A yellow card will put the problem premises on immediate probation and impose tough and uncompromising sanctions. If problem establishments fail to improve, they are at risk of being given a ‘red card’, which will mean the immediate loss of their licence. This is similar to the card alert scheme used to tackle individuals who cause trouble when out drinking.

Concerns have been expressed that adding this scheme to the existing legislation will only serve to confuse people. It has also been suggested that the Licensing Act already gives sufficient powers to licensing authorities and that this scheme will do nothing further to solve the problem of binge drinking.

The principle behind the scheme is that it will give licensing authorities who choose to endorse it the ability to formalise the informal discussions that take place with licensees. However, so far there has been a mixed response to the scheme. Some regions claim that it will hardly be used whilst others are keen to encourage enforcing authorities to implement it.

Although the majority of licensees take their responsibilities seriously, there are worries that enforcing authorities are not exercising the powers given to them under the Act to take action against those who do not. It remains to be seen whether the card alert scheme will do anything to achieve better results in the fight against binge drinking, but it is clear that in certain areas licence holders may face added regulatory pressures.

Interestingly, recent data show that more than 60 per cent of all licensed premises closures in England and Wales for the year to March 2009 took place in Humberside and Leeds.

Performing Rights Licences
Licensees will be pleased to know that an attempt by Phonographic Performance Limited (PPL) to increase the cost of licences to play music in public places by up to 200 per cent has failed because the court ruled that the proposed increases were not reasonable.

As a result, holders of PPL licences will see increases of around the 10 per cent mark.

Can You Justify Your Service-Related Pay Scheme?
The Court of Appeal has ruled (Wilson v Health and Safety Executive) on the correct approach to objective justification in equal pay claims that arise from service-related pay schemes which have a disparate impact on women compared with men.

Mrs Wilson worked for the Health and Safety Executive (HSE) as a health and safety inspector. She claimed that the somewhat complex pay system operated by the HSE, which determined pay in part by reference to length of service, constituted a breach of the Equal Pay Act 1970. She accepted that the nature of the job was such that performance would be likely to improve with experience for the first few years, but she did not believe that the HSE was justified in applying this criterion over a ten-year period.

In a similar case (Cadman v HSE), the European Court of Justice (ECJ) found that as a general rule the criterion of length of service is appropriate to attain the legitimate objective of rewarding experience acquired which enables the worker to perform his or her duties better. An employer does not generally have to produce specific proof in order to justify the practice unless a worker provides evidence ‘capable of raising serious doubts’ in the minds of the Employment Tribunal (ET) as to whether the link between pay and length of service is in fact rewarding experience that enables the worker to perform better. In that case, the employer must demonstrate the absence of unlawful discrimination.

Following on from this judgment, the Court of Appeal in Wilson v HSE held that an employer can be required to provide objective justification for the way a service-related criterion as a determinant of pay is used as well as for its adoption in the first place. The circumstances in which this would be necessary – i.e. when the burden of proof switches to the employer to show that use of the length of service criterion is appropriate – are when the employee shows that there is evidence from which, if established at trial, it can properly be found that the general rule in Cadman does not apply. It is not enough that the evidence is capable of raising serious doubts. It must establish a basis for inferring that the adoption or use of the length of service criterion is disproportionate. In Lady Justice Arden’s view, the ECJ in Cadman was putting forward the ‘serious doubts’ test as a ‘filter on claims’, a preliminary test which still left the issues to be decided at the trial. As such, the requirement of ‘serious doubts’ is merely the counterpart of a length of service pay criterion not requiring justification in the usual case.

In the Court’s view, Mrs Wilson had fulfilled the serious doubts test and, on the ET’s findings in the case, her appeal was upheld.

The Court went on to say that even if it was wrong about the effect of the decision in Cadman, in domestic law the Equal Pay Act 1970 and the Sex Discrimination Act 1975 interpreted together place the burden of showing objective justification, including proportionality, on the employer and neither Act contains any exception for the length of service criterion.

Asbestos Fines Mark Beginning of New Health and Safety Campaign
The Health and Safety Executive (HSE) has prosecuted three firms in Yorkshire for removing asbestos without a licence. After pleading guilty, the three firms were fined an average of more than £5,000 each with costs averaging more than £4,000. Two firms in Essex also recently faced fines and costs totalling more than £110,000 for the same offence.

The HSE has recently launched an ‘Asbestos – Hidden Killer’ campaign to highlight the dangers of asbestos, particularly in the building trade. It claims asbestos is Britain’s biggest workplace killer, causing more than 35,000 deaths annually.

For more information, see the HSE website’s asbestos information pages at
http://www.hse.gov.uk/asbestos/index.htm.

With a rising death toll from asbestos exposure, the HSE is taking a tough line on those who break the law regarding the treatment of asbestos. Failing to follow proper procedures to protect the health and safety of employees and others can lead to civil actions for damages as well as prosecution.