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April 2008 Updates

Changes to income tax rates

With effect from 6 April 2008, the 10% starting rate of income tax was abolished. Prior to this change, the first £2,230 of taxable income was taxed at 10%. The basic rate of income tax has been reduced from 22% to 20%. In the current tax year (2008/2009), this will apply to all taxable income up to £36,000 and the 40% higher rate of income tax will apply to all taxable income over £36,000. The basic personal allowance is £5,435.

Changes to the Sex Discrimination Act 1975

Various changes to this Act came into force on 6 April 2008. We have a new definition of sexual harassment. A person complaining of sexual harassment is now only required to show that the alleged treatment was connected or associated with their gender and not that it took place because the complainant was a man or woman. Employers can also now become liable failing to protect employees from sexual harassment by third parties, such as a customer or client. An employer who fails to take reasonably practicable steps to protect their employees from third-party harassment where such harassment is known to have occurred on at least two other occasions will become liable for those acts. A woman on maternity leave will now be able to claim discrimination for non-payment of a discretionary bonus that relates to the two-week period following childbirth when she is on compulsory maternity leave.

Information and consultation of employees

With effect from 6 April 2008, the Information and Consultation of Employees Regulations 2004 came fully into force and now apply to all businesses with 50 or more employees. The requirement to inform and consult with employees does not operate automatically. It is triggered either by a formal request from employees for an Information and Consultation (I&C) agreement or by employers choosing to start the process themselves. An agreement must set out how the employer will inform and consult with employees or their representatives on an ongoing basis, but the legislation lets them agree arrangements and structures tailored to their individual circumstances. The Regulations also provide for the retention of information and consultation agreements already in place which have workforce support.

Tax consequences of wrongly viewing an employee as self-employed

The Income Tax (Pay As You Earn) (Amendment) Regulations 2008 also came into force on 6 April 2008. These Regulations closed a loophole which arose as a result of the case of Demibourne v HMRC. This case held that HMRC was entitled to charge an employer full tax and National Insurance contributions under the PAYE regulations where the parties have wrongly viewed the employee as self-employed without giving credit for the tax and national insurance already paid directly by the “employee”. The Regulations therefore prevent potential double recovery by HMRC.

TUPE dismissals

In the recent case of Dynamex Friction v Amicus, the Court of Appeal held that, when considering the question of whether the reason for a dismissal was related to a TUPE transfer or instead an economic reason (which is potentially lawful), it is the thought process of the person who took the decision that needs to considered. In this particular case, the company had gone into administration. The administrator took the decision to dismiss the employees as there were insufficient funds to pay them. It argued that the dismissals were therefore an economic reason. Although a purchaser of the company was found a week later, the Tribunal held that the administrator did not dismiss the employees in order to enhance the prospects of selling the business and, accordingly, the employees were not dismissed immediately prior to the transfer (which would constitute an automatic unfair dismissal). The employees argued that the Managing Director of the company had, in effect, used the administrator as a puppet and that the administration had been stage managed. However, as the Tribunal had found there to be no evidence of collusion between the administrator and the Managing Director, the Court of Appeal held that, when asking who made the decision to dismiss, as long as the administrator’s decision was made independently, it was his decision making process alone that needed to be considered.

Email: info@stewartlaw.co.uk


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