Pharmacy.Biz News

Protecting value

Owning a freehold property gives the pharmacist the reassurance that he or she can continue to trade from the same site for as long as they choose. In contrast a lease is an asset which reduces in time and value. Failure to renew or extend a lease could be disastrous. Relocation will be a significant issue for the majority of pharmacists but it can be especially problematic if the existing pharmacy is located within close proximity to a medical centre or doctor’s surgery. Pharmacists must ensure that they can get the best protection to keep their pharmacy in the location their business requires to be profitable.

Right of first refusal

If the freehold of the pharmacy is not for sale and the landlord is not prepared to sell it to you, you could ask the landlord for a right of first refusal should he ever decide to sell. The advantage of having this right is that the landlord will have to offer the freehold to you before he offers to sell it to anyone else. Once such a right has been formalised an entry would be made on the landlord’s title preventing any sale without the pharmacist’s knowledge or consent.

While the obvious time to approach your landlord to request a right of first refusal would be when you take a new lease or acquire an existing pharmacy business there is no reason why an approach cannot be made at any time, although the landlord may ask for some payment for this right.

The down side of such an agreement is that the landlord may never choose to sell leaving you without an opportunity to buy the freehold.

Option Agreements

An alternative to this is an “Option” where you would have a right to ask the landlord to sell its freehold interest to you within an agreed period of time. Your landlord is likely to be reluctant to enter into such an agreement (particularly without an option fee being paid) as the pharmacist could require him to sell the property at any time and this would be out of the landlord’s control.

If you are able to negotiate an Option to purchase the freehold this option would then be available at any time during the “Option Period”. This period could be anything from a few weeks to a number of years. It would be up to the parties to negotiate the timeframe they were happy with. During the option period you could call on your landlord to sell his freehold interest and he would not be able to refuse.

Negotiating the documentation

Any right of first refusal or option agreement needs to be carefully drawn up to protect your position and legal advice should always be sought. The documentation will need to clearly set out:

The price payable or, if based on the property’s value, how the value of the property will be calculated should the option or right be exercised
give details of timing including when notices are to be served and payments made
set out how long the agreement is valid for
in the case of a right of first refusal a provision to ensure that the landlord cannot sell on any terms which are better than those offered to the pharmacist, and if no such sale takes place within a given time period, the pharmacist’s right of first refusal will continue to apply on any future sale

Other Issues to consider

Buying the freehold under either route will involve a one-off payment and other costs such as Stamp Duty Land Tax and valuation and other professional fees rather than the potentially more cash flow friendly alternative of rent. The choice which is right for you needs to be carefully balanced looking at both long and short term considerations.

It is important that you know the full picture before entering into such an agreement. If there are residential flats above your premises which are let separately to your pharmacy, you could find yourself becoming a landlord of the upper floors if you buy the freehold. If there are two or more flats there could also be issues surrounding the seller being legally required to offer the right of first refusal to the flat tenants first and any option or right of first refusal may not be capable of being granted.

Given that the rights we have discussed may not always result in you being able to buy the freehold or be a cost efficient option, it is very important your lease contains suitable rights to renew. This could either be a statutory right to renew (set out in the Landlord and Tenant Act 1954) or a specific contractual right to renew at the end of the lease.

The above is a general overview and we recommend that independent legal advice is sought for your specific concerns. For guidance, please contact Kate Wheeler, a solicitor in the Pharmacy Real Estate Team at Charles Russell LLP on kate.wheeler@charlesrussell.co.uk

Capital allowances

The last few years have seen many changes in the way in which businesses – both incorporated and unincorporated – claim capital allowances on their cars, equipment and industrial buildings and in this article we review the current position.

While for the purposes of its accounts, a business is able to depreciate its capital assets – its plant and machinery, equipment, cars, fixtures and fittings – at whatever rate it considers to be reasonable in the circumstances, that depreciation is not an allowable deduction for tax purposes. Instead, capital allowances are given on the cost of the assets at rates prescribed by legislation...

Plant and machinery

Capital allowances are given for expenditure on “plant and machinery”- which is taken to include all assets kept for permanent employment in the trade. Although in the case of expenditure on equipment, machinery, computers, cars etc, the availability of capital allowances is generally not in doubt, H M Revenue & Customs will deny capital allowances on expenditure which, rather than performing a function in the business operations, provides the place or setting in which these operations are performed.

From 1^st April 2010, the first £100,000 of capital expenditure on qualifying business assets – office equipment, computers, machinery, cars etc – is covered by the Annual Investment Allowance (AIA), so that the cost is allowed in full for tax purposes in the year in which it is incurred. The AIA was increased from £50,000 in the March 2010 Budget.

Many businesses will have an accounting period that spans 1^st April 2010, the date from which the AIA is increased to £100,000. The maximum AIA for such businesses for that particular accounting period is calculated proportionately, with the £50,000 and £100,000 maximum pro-rated on a daily basis.

Expenditure over the AIA amount is added to either the “main pool” or the “special rate pool” and capital allowances (called writing down allowances or WDAs) are calculated on the balance of the expenditure in those pools at 20% and 10% per annum respectively. The special rate pool is used for expenditure on certain types of integral features of a building, on long life assets (those with an expected economic life of 25 years or more) and on high emission cars (see below). Expenditure on all other qualifying assets is included in the main pool.

The amount of WDA is proportionately increased or reduced if the accounting period is longer or shorter than 12 months.

Cars

For cars purchased as from April 2009 (1^st April for companies and 6^th April for businesses subject to income tax), the old distinction between cars costing less than or over £12,000 has disappeared and the new regime is based entirely on the CO2 emissions of the car:

Cars with CO2 emissions of 110g/km or less: a 100% first year allowance is available – if the full amount is not claimed the balance of the expenditure is included in the main pool of plant and machinery expenditure and capital allowances of 20% per annum are claimed in subsequent periods.
Cars with CO2 emissions of over 110g/km and up to 160g/km: the cost is included in the main pool of plant and machinery expenditure and capital allowances are given at a rate of 20% per annum
Cars with CO2 emissions of over 160g/km: the cost is included in the special rate pool on which capital allowances are given at a rate of 10% per annum

In the case of unincorporated businesses (sole traders and partnerships), if there is private use of a car then the cost of each car with private use is treated separately, with the capital allowances (calculated at the above rates) reduced to take account of the proportion of private use.

For cars purchased before April 2009, the old rules continue to apply until 2014 – cars which cost £12,000 or more will continue to be treated separately and their capital allowances restricted to £3,000 per annum, until the first accounting period beginning after 1^st/6^th April 2014 (for companies/unincorporated businesses respectively) when any remaining expenditure will be transferred into the appropriate pool by reference to the car’s CO2 emissions (cars with private use belonging to unincorporated businesses will continue to be treated separately so that allowances can be restricted for the private usage).

Industrial Buildings

Industrial Buildings Allowances (IBAs) are being phased out and will shortly disappear altogether. IBAs were given at a rate of 4% per annum on the allowable original cost; however the rate has been gradually reduced since April 2008 and the current rate (from 1^st April 2010) is just 1%. No IBAs will be given as from 1^st April 2011.

Krystyna Knight, of Silver Levene provided research for this article.

Disclaimer

Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene (Incorporating Modiplus+). He can be contacted on 020 7383 3200 or umesh.modi@silverlevene.co.uk

Top planning issues for pharmacists

One of the first considerations in opening a new pharmacy is whether a pharmacy has planning permission allowing it to be opened as a pharmacy and authorising any changes required to it (for example changes to the shop front or to erect the pharmacy signage). Failure to have the correct planning permissions can prevent the pharmacy from trading...

Permitted use – retail or dispensing pharmacy?

Planning permission is usually required to allow property to be used for a given purpose. It is normally obtained by the grant of planning permission by the local planning authority. The continuous uninterrupted use of a property without objection by the local planning authority for a period of 10 years or more for a given purpose also has the effect of giving implied consent to that use for planning purposes as the local authority are usually unable to enforce a breach of planning after that time.

Most pharmacies sell ancillary products as well as medicines for example, cosmetics, toiletries and foods. These pharmacies are usually described as retail pharmacies. Their use falls within Class A1 of the Town and Country Planning (Use Classes) Order 1987 (the “1987 Order”).

Many doctors’ surgeries and health centre developments are usually granted planning permission authorising use as a medical centre within Class D1 of the 1987 Order.

The question often arises on a new health centre development as to whether the pharmacy use is authorised if a D1 planning use has been allowed and the pharmacy use is not referred to on the planning permission. The answer to this question is not always clear.

Often, a health centre planning permission will not specifically refer to the pharmacy use at all. Whether the pharmacy is authorised will depend on whether the original planning application included reference to the pharmacy on the application and supporting drawings. If it was included in those drawings then it is likely that the pharmacy has been authorised. Use as a retail or dispensing pharmacy, though, will depend on the following factors.

Usually, a purely dispensing and not retail pharmacy in a health centre will be allowed where a D1 planning permission has been granted as the use is construed as ancillary to the main health centre use for planning purposes.

A retail pharmacy may not be considered as ancillary to the main health centre use depending on the nature and extent of the retail use. This will be a question of fact and degree in each case. To assess this, the extent of retail use as part of the pharmacy’s business will need to be quantified. If such use is more than very minor then it is likely that the pharmacy will not be construed as ancillary to the medical centre use and a specific planning permission authorising A1 retail use will be needed.

If the use is allowed are there are any other concerns?

Some planning permissions contain conditions that limit the use of the property. These need to be checked carefully as such conditions can make the use of the property personal to a particular entity (thus restricting the future disposal of the pharmacy) or limit the hours of trade. Where there is a restriction limiting trading to certain hours this can cause problems if it conflicts with the trading hours required by the terms of the NHS contract.

Other considerations

Changes that affect the external appearance of a property usually require planning permission. Alterations to a shop front or to erect pharmacy related and other fascia signage are examples of external works which may require specific planning permission and advertisement consent from the local authority.

Special rules apply if the property is listed and additional permissions will be required from the local planning authority if any works are proposed. This is because there are onerous restrictions which apply to listed buildings which require the local authority to provide listed buildings consent to authorise any alterations regardless of whether they effect the interior or exterior of the pharmacy in addition to any planning consents which may be required for external alterations. Failure to obtain listed buildings consent is a criminal offence.

Why this matters

Failure to have the correct planning permissions can result in the local authority taking action to prevent a breach of planning (whether it is a breach of the permitted use or unauthorised alterations). In a worse case scenario this could result in the pharmacy having to close.

The above is a general overview and we recommend that independent legal advice is sought for your specific concerns. Please contact Claire Timmings on Claire.Timmings@charlesrussell.co.uk. Claire is an Associate in the Pharmacy Real Estate Team at Charles Russell LLP.

P11D Benefits and Expenses

On the post 6^th April to do list, there is a legal requirement to complete the P11D, P9D and P11D(b) expenses and benefits forms, writes Umesh Modi...

It is very important that the appropriate form is chosen:

The P11D must be completed for company Directors and Employees earning £8,500 or more a year - form P11D.

The form P9D must be completed for Employees earning less than £8,500.

Once the P11D and or P9D forms are completed the form P11D(b) must be completed and used to calculate the 12.8% Class 1A NICs due on all the taxable expenses and benefits.

All of these forms must be submitted to HM Revenue & Customs by 6 July and the payment of the Class 1A NICs declared on form P11D(b) must then reach HMRC by 22 July, or by 19 July if you pay by cheque.

For the purposes of this article I will look at the form P11D.

Benefits and Expenses

Even though there are a plethora of benefits and expenses that must be declared I have discussed the main ones below:

Company Car

The provision of a company car for the sole purpose of one employee is a taxable benefit. The benefit is based on the CO2 emissions of the car. The more pollutant the car the higher the benefit in kind. A diesel car is taxed more heavily than a petrol car.

Car Fuel

If the company provides fuel for a non pool car then potentially a fuel benefit will arise unless the fuel was solely used for business travel or the director /employee makes good the whole fuel cost used for private journeys. In either case the employee/director must keep travel logs to justify any position taken.

Vans

A van with unrestricted private use has a flat rate benefit of £3,000. If the van is shared between employees then the cash equivalent is split based on days used. If free or subsidies fuel is provided for private use the employee will also incur a £500 benefit in kind.

Mileage allowance

If an employee/director uses his own car for business purposes then he can only be reimbursed 40p for the first 10,000 and 25p thereafter.

Mobile telephone / Telephones

If an employee is provided with a mobile phone a taxable benefit in kind does not arise. If however the employee is given more than one mobile phone or the company pays the employees mobile or telephone costs where the contract is between the employee and the phone company then the non-business calls and line rental will be a taxable benefit in kind.

Travel and subsistence and Entertaining expenses

If such expenses have been incurred, then the cost, the purpose of the cost needs to be recorded and then the total needs to be shown on the P11D form. Of the costs incurred a claim can be made for the business element, which will ensure that this is not taxed.

Interest free or low interest loans

If your employer has given you an interest free loan or a low interest loan then this will need to be reflected on the P11D. HMRC’s rates of interest change through the year which is why when preparing the P11D either the benefit in kind is calculated using the average rate or the benefit in kind can be calculated based on the actual rates.

Christmas Party and Annual Events

As long as the cost of such events does not exceed £150 per head through out the tax year then there will be no taxable benefit. If the expense exceeds this limit a taxable benefit will arise.

Penalties

If the forms are not submitted by the due date, the HMRC can charge two different penalties:

For each form, there is an initial penalty of up to £300, plus up to £60 a day if the failure continues.
An automatic penalty of £100 per 50 employees for each month the failure continues in respect of not making a return of Class 1A NIC.

Failure to complete a correct P11D can also incur a maximum penalty of £3,000 for each fraudulently or negligently prepared return

Reducing the Administrative Burden

The preparation of the P11D forms are a significant administrative burden. However this burden can be reduced if the business gets a PAYE settlements agreement (PSA) with HMRC. A PSA scheme is used to settle PAYE (Pay As You Earn) tax and National Insurance contributions (NICs) due.

Summary

The secret to preparing P11D forms is good record keeping. Should HMRC ever enquire, you should be able to explain why your employee took a journey in a car or why certain employees went abroad …etc. You should also do your best to get dispensations where possible as items covered by dispensations do not need to be declared on the forms there by reducing the chance that your company will submit an incorrect P11D which potentially is liable to £3000 fine.

To get a dispensation a P11DX form must be completed. There is also no need to pay any tax or NICs on items covered by a dispensation

HMRC are more likely to give a dispensation if there is an independent system in place for checking and authorising expenses claims. At a minimum, this means having someone other than the employee claiming the expenses check that they are correct.

Jasbinder Bahara, of Silver Levene provided research for this article.

Disclaimer

Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene (Incorporating Modiplus+). He can be contacted on 020 7383 3200 or umesh.modi@silverlevene.co.uk

A landlord's right to enter my pharmacy - should I be worried?

Nearly all property leases have a list of the landlord’s “exceptions and reservations” and which include the landlord’s ( and others’) rights to enter the property for various purposes. Reason for entry In general, the rights to enter are for the purpose of the landlord checking that the pharmacist has complied with the lease obligations such as the requirement to repair, maintain and clean the pharmacy. The landlord might also wish to check up on whether or not the tenant has carried out any alterations or is selling goods not permitted under the permitted use clause.

Repairs

The landlord may also wish to enter so as to carry out his own repairs to adjoining shops or other parts of the building in which the pharmacy is located. There are likely to be more rights of entry permitted where the pharmacy is in part of a building. A well drafted pharmacy lease will have a number of protective clauses in it so as to stop the landlord entering the property too frequently, without proper reason, or disrupting the pharmacy business and causing damage. Some key points The key areas to check are:
1) Ideally the landlord should be obliged to give a set period of written notice to the pharmacist before entering. Sometimes the lease refers to “reasonable notice” i.e. no set period and not written – so not ideal. No notice is usually required in an emergency 2) The landlord should not be entitled to enter the property without being accompanied by a member of the pharmacy tenant’s staff if it is a large pharmacy .This is so that the tenant can monitor the behaviour of the landlord. 3) The landlord should identify the specific purpose for which he wishes to enter. Some leases have a general “sweeper” clause which allows entry where the landlord reasonably considers it necessary. As a tenant, this should be avoided. 4) The landlord can enter with plant and equipment and with workmen where necessary – but subject to restrictions on interference with the business. 5) There should be an obligation not to cause any damage. This is usually restricted to damage to the property itself and not to any fixtures, fittings or stock. Therefore, if there is damage to these items and negligence cannot be proved, it may be necessary for the pharmacist to claim on his own contents insurance. 6) An obligation to make good any damage caused (usually to the property) is common and should be included. 7) Whilst it is not standard in pharmacy leases to include any confidentiality provisions, and this may not be necessary, it should be considered if there is any particularly commercially sensitive information available which would be revealed on an inspection. 8) The landlord and the persons entering should be under an obligation to minimise any disruption to the business. If there is significant disruption, then it may well be possible to claim that the landlord has breached the quiet enjoyment covenant in the lease, as well as perhaps going outside the express rights of entry.

Forfeit

The above rights of entry are different to the right of re-entry to forfeit the lease which the landlord may exercise if the tenant is in significant breach of the lease and/or has failed to pay rent. Adjoining tenants and owners might want to enter the pharmacy , for example so that they can carry out works to their own property, often due to an obligation to their landlord. So should you be worried? As a general rule, landlords do not frequently inspect premises unless there is a risk of there being a breach, they are monitoring ongoing works or showing around a buyer of the property. If they do wish to enter the property, they should abide by the terms of the lease. The pharmacist may have a reason to exclude them if there is no authorised reason for entering or the landlord does not comply with the notice and other provisions in the lease. From a practical viewpoint, most tenants do permit the landlord to exercise their rights of entry and, of course, it is very difficult to exclude a landlord during the pharmacy opening hours. However, if the right of entry might be detrimental to your business, it might make sense to negotiate in the lease that any rights of entry for the purpose of checking repairs, breaches, etc should be after hours and by appointment with the pharmacist . Whilst this is not always agreed by landlords, it is definitely worth requesting. The above is a general overview and we recommend that independent legal advice is sought for your specific concerns. For guidance please contact Debra Kent the Head of the Pharmacy Real Estate Team at Charles Russell LLP on Debra. Kent@charlesrussell.co.uk.

Getting ready for the new tax year

Your 2009 tax return tax is paid, so now ahead and prepare the new tax year on --By Umesh Modi

For those with income over £150,000, 2010/ 2011 will see the top rate of income tax increase to 50 per cent. If you are one of those affected, you may consider taking steps to minimise your taxable income in 2010/11, either by bringing income forward so that it falls in 2009/10 and is taxed at 40 per cent rather than 50 per cent or by delaying capital expenditure to claim
capital allowances in 2010/11 rather than in 2009/10.

For director/shareholders, taking remuneration and/or dividends on or before April 5 2010, will bring the income into the current tax year; likewise, sole traders/partners may consider whether it is possible to bring income forward into 2009/10. Of course, the tax bill on that income will also be brought forward – to January 31 2011 for 2009/10 liabilities, as
opposed to January 31 2012, for 2010/2011 liabilities – but this is weighed against a saving of 10 per cent in income tax.

For sole traders/partners, the timing of expenditure may also reduce the impact of the 50 per cent band – under the new Annual Investment Allowance (AIA), a 100 per cent allowance is available for the first £50,000 of expenditure on plant and machinery each tax year (capital allowances at a lower rate are available on expenditure over £50,000). Delaying
capital expenditure until after April 5 2010 ensures that you claim the AIA against profits taxable after the introduction of the 50 per cent tax rate, reducing your exposure to the top tax rate.

While bringing income forward into the current tax year brings the highest rate of income tax down from 50 per cent to 40 per cent, director/shareholders may also consider reducing their income by leaving funds in their limited company – this will reduce exposure to the 50 per cent tax rate and could potentially bring the eventual tax rate on those funds down
to 18 per cent or even 10 per cent.

A company’s profits after corporation tax (currently 21 per cent or 28 per cent depending on the level of profits) will be taxed on the shareholders only when they are paid out as dividends. If however those funds are left to accumulate in the company until the shares are sold or the company is wound up, the shareholder will suffer capital gains tax rather than income tax on the gain. The rate of CGT is currently only 18 per cent of gains over the annual exemption (currently £10,100) and the rate on the sale of business assets – including shares in a trading company – is reduced to 10 per cent by entrepreneurs’ relief.

Year-end tax planning
Whether or not you will be affected by the 50 per cent tax rate, there are various ways in which you can save tax in the current tax year:
• Invest in an ISA: the maximum amount you can invest is £7,200 per annum, of which up to £3,600 can be in a cash ISA with the rest in a stocks and shares ISA; as of October 6 2009 investors born before April 5 1960 can invest up to £10,200, with up to £5,100 in a cash ISA. The higher limits will apply to all investors from April 6 2010.

• Invest in shares qualifying under the Enterprise Investment Scheme (EIS) – the conditions are complex but broadly, income tax relief at 20 per cent is available for investment of up to £500,000 in qualifying shares. In addition, any gains made on the EIS shares are tax-free as long as various conditions are met.

• Similar reliefs to the EIS are available for investment in a Venture Capital Trust (VCT)

• Use your annual exemption for capital gains tax: gains of up to £10,100 will be exempt from CGT

• Use your annual exemption for inheritance tax: a gift of up to £3,000 per year is exempt, reducing your estate for IHT. The exemption can be carried forward for one year, so if you did not use your exemption in 2008/09 you can make a gift of up to £6,000 in 2009/10

Pension contributions
With effect from April 6 2011, higher-rate income tax relief on pension contributions will be withdrawn for those with, broadly, gross income of £150,000. To prevent individuals making significantly larger than usual pension contributions before April 6 2011, “anti-forestalling” rules have been brought in, which impose a tax charge at 20 per cent on contributions in 2009/10 and 2010/11 above the “special annual allowance”, effectively restricting the relief on those contributions to the basic rate.

The special annual allowance is generally £20,000 (£30,000 in some cases). An individual’s regular monthly contributions, started before the rules were introduced, are “protected pension inputs” and not subject to the charge; however they utilise the allowance so where an individual makes regular contributions totalling more than £20,000, any additional contribution
will be subject to the charge. Higher- rate relief will therefore be available in 2009/ 10 and 2010/11 on “protected pension inputs” and, where those total less than £20,000, additional contributions up to the £20,000 limit. Krystyna Knight, of Silver Levene provided research for this article.

Pharmacy leases – use restrictions

Pharmacies are much more than just dispensers of medicine and provide a variety of other services. Michelle Rowe looks at what impact different services will otentially have on the terms of a pharmacist’s property lease.

Many pharmacies now sell a large range of retail products as well as providing services in addition to their dispensing pharmacy. Services can include photo processing, blood testing, diet management and the availability of practitioners such as chiropractors, chiropodists or alternative therapists. It is also now common to be able to purchase cosmetics, toiletries and food. Whether or not a pharmacist is able to sell such items and provide such services will depend upon the terms of their lease.

Lease Use Clauses
Leases of commercial property, such as retail premises, usually include restrictions on the use of the property. Landlords do this to retain control, to comply with planning consents and to protect their interest in the property. Although rare, if a lease is silent on what a property can be used for, it can be used for any lawful purpose, subject to planning legislation restrictions.

The permitted use within a lease may be broad, such as ‘retail shop’, or by reference to the business, for example ‘dispensing pharmacy’.

Pharmacy leases usually have a specified use (often ‘dispensing pharmacy’) and then a wider permitted use with landlord’s consent (often ‘other retail use’). If the lease does not state that landlord’s consent to this wider use must not be unreasonably withheld or does not permit a change of use, the landlord may decline a request to change the use for any
reason or alternatively consent to it but demand a premium from the pharmacist for doing so.

Ideally, pharmacists should negotiate a wide use clause to cover all contemplated uses of their property. A pharmacist with a lease which only permits use as a ‘dispensing pharmacy’ and which provides the products and services above could be in breach of its lease.

Rent
A narrow definition of a property’s use may affect a pharmacists ability to transfer or sublet the property as it will not be as attractive to potential buyers. A widely drafted clause will give more options to the pharmacist in the future, particularly if the pharmacist is unsure as to how long the property will be used as a pharmacy However, a wide use clause can increase the
rental value of the property at rent review - consequently a pharmacist would pay for the flexibility! This should therefore be a consideration for a pharmacist when first agreeing the lease terms with the landlord.

Other Considerations
Before changing the use of a property, a pharmacist must consider whether there are any restrictions other than those contained within the use clause of the lease which may prevent the change. There may be other clauses within the lease, for example restricting alterations and planning applications to the local authority. In addition, outside the lease there may be
restrictive covenants affecting the landlord’s title and planning legislation restrictions which may require separate consent.

Breaching the Lease
If the pharmacist breaches the use clause of the lease the landlord has a number of remedies. These include taking steps to terminate the lease, although the court may allow the lease to continue if the prohibited use ceases. The landlord may alternatively seek a court order to stop the tenant’s unauthorised use or seek compensation in the form of ‘damages’ for any loss it has suffered. As well as sanctions under the lease breaches of planning legislation can lead to criminal penalties.

If any planning permission imposes restrictions on the use of the property, the planning authority may also take enforcement action in the event of a breach. Such actions will be costly and disruptive to the pharmacist.

Conclusion
When taking a new lease, a pharmacist should ensure that the user clause is wide enough to encompass all of the products and services that it is envisaged will be sold or provided at the property. It is not advisable to restrict the property’s use to ‘dispensing pharmacy’ but the definition instead should include ‘retail chemist’, ‘treatment rooms for health practitioners’
and any other elements the pharmacist foresees the property being used for. Further, other ‘retail use’ should be allowed with the landlord’s consent, not to be unreasonably withheld. This wider use clause will have the benefit of making the property more marketable in the future.

Before agreeing heads of terms for the purchase of a new property with a landlord pharmacists should discuss their ‘wants and
needs’ for the property and their business with their legal advisor.

Company law changes to effect pharmacies

The Companies Act 2006 (CA 2006) has introduced wide ranging changes to company law and will be relevant to all pharmacy companies. Jenny Packer looks at the main changes that took effect in the last stage of implementation on October 1 2009.

Company Constitution The Memorandum of Association (the “Memorandum”) has been greatly simplified for new companies. Any new companies will have unrestricted objects unless a restriction is specifically included in the Articles of Association (the “Articles”).

For companies in existence prior to October 1 2009 the objects and the majority of the content
set out in their Memorandum will automatically become part of the Articles. It is possible to delete the objects or alternatively adopt new Articles which do not contain objects.

Previously, a special resolution was required to change the name of a company. It is now possible for a company to include a provision in its Articles which allows for the company’s name to be changed by a less onerous procedure (for example this could be by simple majority or by a board resolution).

Share Capital
The requirement to have an Authorised Share Capital has been abolished. For companies existing before October 1 2009, any statement of Authorised Share Capital in the Memorandum
will automatically be deemed to transfer to the Articles and will act as a “cap” on the number
of shares that can be allotted.

The previous requirement for directors to obtain shareholder approval in order to allot shares has now been abolished for private companies with one class of share. Public and private companies with more than one class of share still need to have shareholder consent either contained within the Articles or via a shareholder resolution.

For companies pre-existing October 1 2009, it will be necessary for the shareholders to pass
an ordinary resolution removing the “cap” on allotments in order to benefit from this relaxation
in procedure.

In any event, any pre-emption rights (both statutory and those contained within the Articles) remain valid and so any new shares must first be offered to existing shareholders
in accordance with those pre-emption rights before being offered to a third party.

It is no longer necessary for private or public companies to have specific authorisation in their Articles to reduce their share capital or purchase their own shares. A company is now free to do so unless their Articles contain a specific prohibition.

A private company no longer needs authority in its Articles to allot redeemable shares and it is also now possible to allow the redemption payment to be made after the redemption date (previously the payment had to be made on the date of redemption).

Previously, any variation of class rights required a special resolution. It is now possible for companies to specify less onerous procedures for varying class rights in their Articles. Existing
companies would need to pass a special resolution amending their Articles in order to benefit from this change.

Administrative Matters
It is now possible for directors to file two addresses at Companies House, the first being
a service address which is publicly available and the second being their home address which will only be disclosed to public authorities and credit reference agencies. Directors who are at risk can also apply for further protection. The addresses already held at Companies House
will be deemed to be service addresses and will remain publicly available. It is possible in some circumstances for a director to make an application to remove a home address filed previously provided this was entered onto the register after January 1 2003.

Companies are now obliged to maintain a register of the directors’ confidential addresses
in addition to the register available for public inspection.

Companies are also required to inform a person who requests to see the register of members whether or not the information is up to date and if not, the date to which it has been made up. The company and each director may be liable to a fine if they fail to comply. There is also a new procedure which enables a company to refer a request to view the members register to the courts if they suspect a request may have been made for improper purposes.

All Companies House forms have now been amended. In some cases the content has been amended to reflect the new Act and in all cases the forms have been renumbered.

Operators of pharmacy companies should ensure they are aware of not only the above changes, but also the changes previously introduced in 2007 and 2008. Although no immediate amendment is necessary to the constitutional documents of a company, it is recommended that companies undertake a
review of their documents and consider whether they should amend them so as to take advantage of the deregulatory provisions and to modernise their constitution.

Getting ready for the self assessment deadline

Umesh Modi looks at what pharmacists need to consider whenfilling out their tax returns for the year.

If you have already filed your 2009 tax re-turn, well done, you are ahead of the game!But if not, now is the time to take action.

The deadline for submission of paperreturns has already passed, on October 31, butfor a growing number of people, and almostall accountancy practices, filing returns onlinehas become the norm, so the deadline for the2009 tax return is January 31 2010.

Filing your return

If you are filing your return yourself, the firststep is to register at www.hmrc.gov.uk for onlineservices. You will then receive, by post, confir-mation of your User ID and an activation PINneeded to get started. Once you have activatedyour account you will be able to prepare andsubmit your return online.

Whether you are filing your return yourselfor collating information for your accountant,the checklist below lists some of the morecommon information that you or your ac-countant will need to complete your 2009 return,which covers the tax year ended April 5 2009.

Business income:

If you are a sole trader or in a partnership youwill need the accounts which ended during thetax year 2008/09, for instance accounts for theyear ended 31 December 2008 or for the yearMarch 31 2009.

If your business started recently or ceasedduring the tax year the position will be a littlemore complex and your accountant will be ableto advise you further.

If you trade through a limited companythen you will need your P60 and P11D for 2008/09, showing your earnings and any benefits/expenses paid for by the company. Companydividends paid in the year ended April 5 2009will also be included.

Unearned income:

Unearned income received between April 62008 and April 5 2009 will be shown on yourreturn, whether from UK or overseas sourc-es – e.g. bank/building society interest, div-idends on shares and unit trusts, rental income(and associated expenses) and pension income,so you will need statements, tax certificatesand dividend vouchers. Where an investmentis held jointly, your share of the income isshown.

If you are non-UK domiciled then 2008/09 marks the first year of the new regime -you chose whether to declare and pay UK tax on your worldwide in-come or whether to be taxedon the remittance basis (i.e.only on that overseas incomewhich you have brought tothe UK) and to pay the£30,000 tax charge. This is acomplex area and your ac-countant will be able to pro-vide more details.

Capital gains:

Details of the sale of capital as-sets – e.g. property, investments– during the tax year will beneeded for your return: the costand sale proceeds, and anyassociated expenses.

The sale of your home willgenerally be exempt from cap-ital gains tax as long as the prop-erty has been used as your mainresidence, and for no otherpurpose, throughout the timeyou owned it, so any gain (orloss) will not be included onyour return.

Other matters:

Tax relief is given for charitable payments undergift aid made in the tax year, so be sure to in-clude these on your return; likewise pensioncontributions paid by you or investments qual-ifying under the Enterprise Investment Schemewill reduce your tax liability.

Paying your tax

As well as being the deadline for the submis-sion of your 2009 return, January 31 2010 isalso the deadline for payment of your tax li-ability for 2008/09 – if you have already madepayments on account towards the year, youmay have to pay a balancing payment. Addi-tionally, if you are required to make paymentson account towards your 2009/2010 liability,the first of these will also be due on 31 Janu-ary 2010.

Interest and penalties

If your return is submitted after January31 2010, you will be charged a £100 penalty;interest will also be charged from February 1on any unpaid tax. If any part of your balancingpayment remains unpaid as at February 28 2010,a surcharge of 5 per cent will be added to yourliability.

HMRC enquiries

Submitting your return and paying your taxis not necessarily the end of the story. If yousubmit your return before the deadline, HMRChave 12 months from the date after your re-turn was submitted to raise an enquiry into it.However, if your return is submitted late,HMRC’s period for raising an enquiry is extend-ed. An enquiry may be a “full” enquiry, into thewhole return or an “aspect” enquiry, into oneor more areas of the return.

So, if your one of the many who has notyet submitted your return, do it now!

Krystyna Knight, of Silver Levene provided re-search for this article.