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Welcome to Fortune Law's Briefing Update 
Welcome to our briefing update for April 2010.
This month is all about fine cuisine, excellent hospitality and issues relating to restaurants and bars in particular. We act for a number of entrepreneurs and business consortiums who operate in the hotel, nightclub and restaurant sector advising them on all manner of legal issues including moving premises, fitting out, employment contracts, supplier agreements and financing arrangements.
Our client of the month is none other than L'art du Fromage a brand new French restaurant and the first speciality cheese restaurant in Britain. They have recently opened just off the Kings Road and the team at Fortune Law were lucky enough to be invited to pre Opening Night to give our reviews and enjoy their hospitality. We all had our favourites. I still dream of the Ile Flottante pudding. Since its opening in February L'art du Fromage has received substantial praise in the press and as a result there is now a waiting list to dine!
In line with the hospitality theme, one of our legal updates relates to rent deposits paid by commercial tenants including but not limited to restaurant owners. The second legal update focuses on hiring employees from outside the European Economic Area and finally we visit the area of minimum wages and payment of tips in particular.
Our featured case revolves around the magnificent Hotel Cipriani in stunning Venice and sets the rules on the law of infringement of the goodwill associated with an established business's name and reputation.
If you have any questions in relation to any of the matters set out in this briefing update or wish to speak to us in respect of any other legal issues do call or email us on 0207 440 2540 or skassam@fortunelaw.com. We are always happy to help. |
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Featured Client Jean-Charles Madenspacher and Julien Ledoger
"It's never easy to start a business, especially as foreigners. Fortune Law was great in assisting us with the negotiating and completing of the commercial lease for our new restaurant.
Thanks to their knowledge and legal experience, their availability, their professionalism and their sympathy, we have been able to go ahead with serenity." |
Is VAT payable on a Rent Deposit in respect of a Commercial Lease?
A rent deposit is a sum of money provided by a tenant to his or her landlord as security for payment of the rent and performance of the covenants in the lease. The rent deposit deed details the circumstances in which the landlord can draw against this money and the conditions that must be satisfied for the deposit to be repaid to the tenant.
A rent deposit is attractive to landlords because it is an immediately accessible source of money that can be withdrawn as soon as the tenant is in breach of a relevant covenant in the lease. There is no need to take legal proceedings to recover the debt or secure performance of the obligation.
A number of our clients have questioned whether it is necessary to pay VAT on a rent deposit. It is accepted that the rent deposit sum itself does not bear VAT because the landlord is making no supply in return for the initial deposit of the monies.
The landlord makes a 'VATable' supply only if and when the landlord withdraws monies from the deposit. If the landlord is withdrawing monies from the deposit, this will be because the tenant has not paid money due to the landlord (for example, for rent or service charges).
In practice therefore it is usual for tenants to pay VAT on the rent deposit as it is impractical for the landlord to recover the VAT element should the tenant default on payment.
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Employing Workers from France, Romania and Japan. What is the difference?
As the trend towards globalisation and mobility continues, immigration and visa requirements play a bigger part in the recruitment process and in business operation considerations. An employer's ability to recruit key personnel within the time frame demanded is a crucial factor in its continued success.
Recent changes to the criteria and application process for clearance to work in the UK include the introduction of the points-based system. Under the new points-based immigration system there are five tiers of individuals who can come to the UK to work who are from outside of the EEA; Japan for example:
Tier 1: Highly skilled general migrants, entrepreneurs, investors and post-study work
Tier 2:Skilled migrants with job offers who are coming to the UK to fill a gap in the UK labour market
Tier 3: Low skilled migrants who are recruited to fill specific temporary labour shortages;
Tier 4: Students;
Tier 5: Youth mobility and temporary migrants, those coming to the UK for primarily non-economic reasons.
The launch of the points-based system aims to make the system more transparent and objective and to better punish non-compliance. Employers must read and follow the guidance in relation to the new system and have realistic expectations as to the timing and their ability to bring employees into the UK. The new penalties in place for non-compliance with immigration legislation must focus employers' minds on the increasing need for scrutinising their practices with regard to record-keeping and for accurate immigration applications tobe made.
So in conclusion,workers from countries inside the EEA, for example France and Germany, are free to enter and work in the UK without having to seek permission from the United Kingdom Border Agency. Employers should be aware that although countries such as Bulgaria and Romania are now part of the EEA, workers from those countries are still required to apply for an accession worker card to authorise them to work in the UK and employers are required to apply for a work permit.Workers from countries outside of the EEA, for example Japan and Australia, must obtain the required points in accordance with the points-based system as set out above.
For further information on applying for a sponsorship licence, points-based applications or any other business immigration issues, please feel free to contact us. |
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Tronc and the Minimum Wage - Annabel's and Harry's Bar
A tronc is an arrangement mainly used in restaurants and bars to pool service charges, tips and gratuities which are then distributed to employees by a 'troncmaster' who is usually an employee responsible for the sharing out of tips and gratuities.
The National Minimum Wage Act 1998 gives workers the right to minimum hourly pay, which is currently £5.80 and is due to rise to £5.93 in October 2010. Regulation 30 of the National Minimum Wage Regulations 1999 states that all payments paid by the employer are included, but service charges, tips, gratuities or cover charges not paid through the payroll are excluded.
In the recent case of Annabel's (Berkley Square) Limited; George (Mount Street) Limited; Harry's Bar Limited v Commissioners for HMRC [2009] the Court of Appeal held that tips received by an employer, which were transferred to a troncmaster's bank account before being distributed, were not paid by the employer for national minimum wage (NMW) purposes.
The treatment of service charges, tips and gratuities was the subject of a recent Government consultation which changed the law late last year making it unlawful for employers to use service charges, tips and gratuities in this manner. Regardless of whether an employer's method of paying those monies to its workers amounts to them being "paid by the employer", the employer will be prohibited from using them when calculating whether it has paid the NMW to those workers.
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CIPRIANI - Hotel or Restaurant?
The claimant, Hotel Cipriani Srl (HC) owned the luxurious "Hotel Cipriani" in Venice. HC did not carry on any business at premises in the UK but its Venice business had an international reputation. It owned, among other trademarks, a Community Trademark (CTM) which covers all 27 member states in Europe, for the word CIPRIANI, registered with effect from 1 April 2006 for various goods and services including hotels, restaurants, bars and catering. It also held a UK trademark, registered with effect from 11 October 2006, in respect of the same word for the same goods and services. The defendant, Cipriani (Grosvenor Street) Limited (CGS) which owned the "Cipriani London" restaurant was also using the words CIPRIANI in the name of the restaurant.
In November 2006, the claimant issued proceedings against the defendant in relation to the defendant's activity in the UK, claiming, among other things, infringement of the CTM.
The defendant tried to defend the claim by arguing that they used the word CIPRIANI in respect of restaurants in the UK and not in the rest of Europe and also claimed that they were using the word as their own name in an honest manner in the ordinary course of their business.
The High Court upheld the claimant's claims and the defendant appealed.
The Court of Appeal upheld the High Court's decision that the defendant had infringed the CTM because the defendant's use of the CIPRIANI sign was not within accordance with honest practices.
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| Free UK Trademark Search Package |
During March and April, you can take advantage of our UK trademarking search service for free. Until April 30th 2010 we are waiving our usual search fee. Just quote Code FLNL3 when you call us. | | Offer Expires April 30th, 2010 |
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Please note that information contained in this briefing update does not constitute legal advice. All statements of law are applicable to the laws of England and Wales only. Copyright Fortune Law 2010. All rights reserved. |
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