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Goli-Michelle Banan comments on boundary disputes in The Telegraph

Posted on: January 30th, 2024 by Maverick Freedlander

Following JK Rowling’s recent dispute with neighbours over hedge maintenance, Director and Head of Residential Real Estate Goli-Michelle Banan comments on resolving boundary issues.

Goli-Michelle’s comments were published in The Telegraph, 26 January 2024, and can be found here.

“We had one where the neighbour of a client built a fence that was much higher than the one before. They said it was for privacy reasons but our client argued that it was not just unsightly, it also blocked the light coming into their garden.

“It’s more common in cases where neighbours have a shared pathway, larger properties or blurred boundary lines.”

 

Proposal to reintroduce employment tribunal fees

Posted on: January 10th, 2024 by Natasha Cox

The government has announced a consultation on the proposal to reintroduce fees for bringing employment tribunal claims.

First introduced in 2013, employment tribunal fees saw claimants having to pay separate fees to issue their claims and to have them heard. Fee levels differed according to the nature of the claim.

On 26 July 2017, the Supreme Court declared employment tribunal fees to be an unlawful interference with the common law right of access to justice and the fees were subsequently abolished.  

However, the government has now announced proposals to reintroduce tribunal fees. Under the proposed scheme, tribunal issue fees would be at the flat rate of £55 per claim. In the event of a multi-claimant claim, the fee would be unchanged, with the multiple claimants being treated as a single entity. No separate hearing fee would be payable.

The £55 fee would also apply on lodging an appeal in the Employment Appeal Tribunal (EAT), however the fee would apply per tribunal decision, direction or order being appealed. Therefore, an appellant seeking to appeal more than one tribunal decision or direction could incur multiples of the £55 fee.

A fee exemption would apply in the case of claims in which individuals are seeking a right to payment from the national insurance fund. Further, individuals could apply under the Help with Fees remission scheme where eligible. 

Based on 2022-23 volumes, the government estimates that the proposed fees could generate between £1.3 million and £1.7 million a year from 2025-26 onwards. It is expected that, if the consultation is successful, these new fees will be implemented from November 2024. For now, the status quo remains and claimants may continue to submit claims free of charge. However given the modest level of proposed fees and the cost of administering the employment tribunal, it is arguably not unreasonable to expect that fees will be reintroduced.

James Lyons comments on Tui’s delisting from the London Stock Exchange in Law360

Posted on: January 8th, 2024 by Maverick Freedlander

James Lyons, Director in the Corporate and Commercial team, discusses the wider market implications of travel giant Tui’s plan to delist from the London Stock Exchange, in Law360.

James’ comments were published in Law360, 05 January 2024, and can be found here.

“Whilst some may perceive this as a blow to the appeal of a UK listing, this decision should be viewed within the particular context of TUI, a German company borne out of a legacy merger.  It already has listings in Frankfurt and Hanover, and more than 75 per cent of the trading in its shares occurs in Germany, so this is a decision which appears to be being made for reasons very specific to TUI rather than necessarily reflective of the London market itself.  

“But it is indicative of the global competitive listing environment and another example to demonstrate why the FCA cannot rest on its laurels and should continue to push forward with changes to retain the appeal of the London market for international businesses.”

Registering as a crypto asset business

Posted on: January 5th, 2024 by AlexT

Whilst crypto assets are currently generally unregulated in the UK, businesses that provide certain crypto asset services are required to register with the Financial Conduct Authority (FCA) – the UK’s main financial regulatory body.

For businesses operating within the crypto industry, FCA registration represents a critical compliance milestone, and has been a requirement for cryptoasset businesses operating in the UK since 10 January 2020.

If crypto assets are unregulated, why is there a requirement for FCA registration?

On 10 January 2020, the EU’s 5th Anti-Money Laundering Directive came into effect, which was implemented in the UK by way of amendments to the existing Money Laundering Regulations (MLR).

The effect of the directive being implemented was that, amongst other things, it sought to provide a legal definition of cryptocurrency. It also detailed the types of entities and business operations involving cryptoassets that would be subject to Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations akin to traditional financial institutions.

This directive also appointed the FCA as the supervisor of UK cryptoasset businesses under the MLR.

These regulations require that all businesses that conduct activities, by way of business that fall within its scope, to comply with anti-money laundering and counter-terrorist financing regulations, which includes registering with the FCA.

It is important to note, however, that there is a distinction between being ‘authorised’ by the FCA and being ‘registered’. Successful registration with the FCA as a cryptoasset business shows that the business follows an appropriate level of AML and CTF measures and safeguards,  while complying with the regulations in a manner acceptable to the FCA. It also serves as a mark of credibility in what has, at times, been an industry characterised by a number of bad actors.

As such, FCA registration can enhance the reputation of the business in the eyes of potential customers. However, consumers should be aware that being registered with the FCA does not mean that they will be protected by the Financial Services Compensation Scheme should something go wrong.

What type of crypto asset businesses fall within the scope for registration?

Currently, the following types of crypto asset business activity would fall within the scope for registration with the FCA under regulation 14A of the MLR 2017:

  • Exchanging, or arranging or making arrangements with a view to the exchange of, cryptoassets for money or money for cryptoassets;
  • Exchanging or arranging or making arrangements with a view to the exchange of, one cryptoasset for another;
  • Operating a machine which utilises automated processes to exchange cryptoassets for money or money for cryptoassets (e.g. Crypto ATMs) and;
  • Providing services to safeguard and/or administer cryptoassets or private cryptographic keys to hold on behalf of customers in order to hold, store and transfer cryptoassets.

Registering with the FCA

Registering with the FCA is an involved process and requires significant preparation and understanding of the regulatory requirements. Once a business has determined it falls within the scope of registration, it is then necessary for them to demonstrate that the business has in place a robust financial crime control framework which is compliant with the requirements of the MLR.

This framework should encompass a comprehensive business-wide financial crime risk assessment, tailored to your business model. Essentially, this should demonstrate how a specific business could be manipulated or be used as a conduit for financial crime.

The FCA will expect businesses to identify all risks pertaining to their business model and, as perturbing as some applicants might find this process, being upfront in identifying risks will not weaken an application. Rather, the accurate and detailed identification of risks will make it more likely that the frameworks built around a business model (and in support of a business’ application) are fit for purpose.

As part of the application the business will also be required to provide clear governance structures, customer risk assessment methodologies, policies for due diligence and suspicious activity reporting, as well as financial crime prevention training procedures. Businesses are also required to appoint a Money Laundering Reporting Officer (MLRO) with relevant knowledge and experience.

The FCA will also expect to see a business plan and forecast in support of an application. This plan should include details of the business model, key individuals and responsibilities, sources of liquidity, details of the customer journey and flow of funds.

Since the Travel Rule requirement for cryptoassets came into effect on 1 September 2023, cryptoasset businesses must demonstrate compliance with this. The requirements of the Travel Rule are contained within the Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulation 2022, and require relevant businesses such as exchanges or custodian wallet providers to collect, verify and share information relating to cryptoasset transfers.

As with any application with a regulatory body, the process should not be contentious, and businesses should be aware that the FCA is not actively trying to catch them out or deny an application. A collaborative approach inevitably yields more positive feedback.

Despite this, however, the application process can be long winded and subject to delays. It is not uncommon to have different case handlers and multiple requests for information provided previously which can cause dissatisfaction with applicants.

As such, a well-prepared and presented application is inevitably more likely to succeed and so engaging with an advisor can provide valuable insights and improve the chances of a successful registration. Therefore, as the FCA itself recommends, seeking independent legal advice can be key in presenting a well prepared and informed application.

Will registering with the FCA ‘future proof’ a business?

Currently, relevant crypto asset businesses are subject to limited financial services regulation, primarily aimed at anti-money laundering and counter-terrorist financing obligations. However, subject to governmental consultations, the future regulatory landscape will become more widely applicable, and the government anticipates implementing the legislation required to develop this regulatory regime in 2024.

Businesses wishing to undertake activities involving cryptoassets by way of business will, under this new regulatory environment, be required to obtain authorisation from the FCA. This is because it is intended that certain cryptoassets will be brought within the scope of the definition of ‘specified investments’ and, therefore, the activities in relation to these cryptoassets will be regulated as opposed to the cryptoassets themselves.

It is envisaged that this regulatory regime will be specific to certain types of cryptoassets depending on the regulated activity, and there will be more precise criteria set out in secondary legislation to determine whether a cryptoasset and activity is within the regulatory scope.

As well as existing regulated activities being applicable in relation to cryptoassets, there are also additional proposed activities specific to cryptoassets which will fall within the scope of future regulation, including:

  • Safeguarding and/or administration (custody) activities;
  • Issuance, payment and exchange activities;
  • Investment and risk management activities;
  • Lending, borrowing and leverage activities and;
  • Validation and governance activities.

 As such, carrying out regulated activities involving cryptoassets by way of business will require authorisation by the FCA under part 4A of the Financial Services and Markets Act (FSMA), and this will equally apply to firms already registered with the FCA under the MLR.

At Lawrence Stephens, our team is adept at assisting diverse businesses in harnessing the potential of cryptoassets. With our bespoke legal insights, we ensure your cryptocurrency adoption journey is seamless, safeguarded, and aligned with the developing digital finance sector.

Round up of 2023 employment law

Posted on: December 18th, 2023 by Natasha Cox

As 2023 draws to an end, the employment team at Lawrence Stephens examines employment law developments of 2023 and what we’re expecting in 2024.

Holiday and holiday pay

Changes have also been made to the Working Time Regulations 1998.

All employees are entitled to 5.6 weeks’ annual leave entitlement per leave year. The 5.6 weeks is split into two ‘pots’: one pot of ordinary leave, which is four weeks, and one pot of 1.6 weeks additional leave.

Ordinary annual leave should be paid at the employee’s ‘normal’ rate of pay. This does not necessarily apply to the additional leave.

The government is amending regulations to set out what elements of pay are to be included as ‘normal’ for the purposes of the first four weeks’ leave entitlement. Unfortunately, the regulations do not list specific payments that should be included, and instead refer to certain categories, including:

  • payments, including commission payments, which are ‘intrinsically linked’ to the performance of tasks that a worker is contractually obliged to carry out;
  • payments for professional or personal status relating to length of service, seniority or professional qualification; and
  • other payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks preceding the calculation.

As per previous case law, results-based commission, certain overtime payments, allowances, etc., will still be caught, however there is still uncertainty about payments such as annual or semi-annual bonuses, and it remains to be seen whether this amendment changes much.

For irregular hours workers and part-year workers (both now defined in the regulations), the government is also introducing a new method to calculate their holiday entitlement. Essentially, an irregular hour worker or a part-year worker accrues annual leave at the rate of 12.07% of the number of hours worked, subject to a maximum of 28 days per leave year. A worker will be an ‘irregular hours worker’ if the number of paid hours that they work is ‘wholly or mostly variable’. A worker will be a ‘part-year worker’ if they are required to work only part of that year and there are periods of at least a week in which they are not required to work (and for which they are not paid). This change is intended to address the issues caused by the Supreme Court’s decision in Harpur Trust v. Brazel, in which it held that part-year workers were entitled to 5.6 weeks’ leave per year, irrespective of the hours they worked. 

The government is also introducing ‘rolled up holiday pay’ for irregular hours workers and part-year workers. Rolled up holiday pay is a system under which a worker’s holiday pay is included in their basic pay, rather than paying them when their holiday is actually taken. The practice has been unlawful since 2006 but will now be lawful under the updated regulations.

These changes come into force on 1 January 2024 for holiday years commencing on or after 1 April 2024.

TUPE

The government has announced its intention to change the transfer of undertaking consultation obligations so that there can be direct consultation with affected staff for businesses with fewer than 50 employees, or businesses of any size with fewer than 10 transferring employees. This assumes in both cases that no existing employee representatives are already in place. The regulations are expected to come into force on 1 January 2024 and the changes will apply to transfers that take place on or after 1 July 2024.

National Insurance and Minimum Wage

Class 1 employee NICs will be cut from 12% to 10% from 6 January 2024.

The NICs holiday for veterans in their first year of civilian employment will be extended to 5 April 2025.

For the self-employed, Class 2 NICs will be abolished, and the main rate of Class 4 self-employed NICs reduced from 9% to 8%, from 6 April 2024.

New national minimum wage rates to apply from 1 April 2024 have also been announced, along with a change to the threshold for being eligible for the highest rate. Over 21s will now be entitled to £11.44 per hour, with 18- to 20-year-olds being entitled to £8.60 per hour. 16- to 17-year-olds and apprentices will be entitled to £6.40 per hour.

Fire and rehire

The government has issued a draft Code of Practice on dismissal and re-engagement. It is designed to cover situations such those seen recently with P&O, where an employer makes changes to terms and conditions by dismissing employees under their old contracts and offers to re-engage them on new contracts (with less favourable terms and conditions).

The aim of the code is to clarify how employers should behave when seeking to change employees’ terms and conditions of employment. A court or tribunal will be able to take the code into account when considering relevant cases and they will have the power to increase an employee’s compensation by up to 25% if an employer unreasonably fails to comply with the code. They could also decrease any award by up to 25% where an employee has unreasonably failed to comply.

The consultation on the Code closed on 18 April 2023 and it is anticipated that the government’s response will be delivered in Spring 2024. While the code is still in draft form it is not binding, but any proposed fire and rehire processes should be carefully considered in the meantime.

Flexible working

The Flexible Working (Amendment) Regulations 2023 come into force on 6 April 2024. The regulations amend the existing Flexible Working Regulations 2014 so that the right to make a flexible working application becomes a ‘day one right’ on 6 April 2024. Currently employees must have 26 weeks’ continuous service to make a flexible working request under the legislation (however, nothing prevents employers and employees agreeing flexible working arrangements between themselves, whether formally through contractual variations, or informally). 

It is assumed that the other flexible working reforms contained in the Employment Relations (Flexible Working) Act 2023 will also commence on that date, but this has not yet been confirmed. These reforms will:

  • allow employees to make two flexible working applications every 12 months instead of one;
  • remove the requirement for employees to have to explain what effect they think their flexible working request will have on the employer;
  • require employers to consult with the employee before refusing their flexible working application; and
  • require employers to respond to flexible working requests within two months instead of three months.

Carer’s leave

The draft Carers’ Leave Act 2023 (Commencement) Regulations 2023 have been published, bringing the Carers’ Leave Act 2023 into force from 6 April 2024.

The draft regulations set out important detail relating to the Act. They state that the legislation will cover employees in England, Wales and Scotland. To be entitled to the provision, employees need to be providing long term care. Carer’s leave will be able to be taken in half or full days, up to and including taking a block of a whole week of leave at once. In a similar way to other types of leave, the notice an employee needs to give to take the leave is twice the length of time that needs to be taken. Leave requests do not need to be made in writing.

Employees taking carer’s leave will have the same employment protections associated with other forms of family related leave. This includes protection from dismissal or detriment as a result of having taken the leave.

The draft regulations still need to be passed by Parliament and it is also expected that guidance will be made available before 6 April.

Strike action

The Strikes (Minimum Service Levels) Act 2023 was passed in July. The act gives powers to make regulations to set minimum service levels in certain industries during strike action. The government has now made regulations under these powers to set minimum service levels for ambulance, railway and border security staff. Although the regulations are not yet in force, they are expected to be by the end of the year. A draft code of practice has also been laid before Parliament, but no minimum service levels are yet in force.

Asim Arshad and Ricardo Geada discuss crypto’s legitimate use in The Times

Posted on: November 23rd, 2023 by Maverick Freedlander

Senior Associate Asim Arshad and Director Ricardo Geada discuss the importance of crypto and its legitimate use cases, while contextualising the technology’s misuse, in The Times.

Asim and Ricardo’s article was published in The Times, 23 November 2023, and can be found here.

It is critical for regulators, officials and the public at large to differentiate between the technology of crypto assets and its potential misuse. A broad-brush approach due to the actions of a few is misleading, short-sighted, and indicates a limited understanding of the technology, thus hampering its development as a powerful force for progress and financial inclusion.

Collaboration should be key in any strategy to combat crypto’s misuse, and UK authorities should more actively engage with other regulatory bodies overseas in order to share insights and intelligence to address crypto-related crimes, while fostering the growth of legitimate crypto businesses. The misuse of crypto assets should not overshadow its broader, legitimate applications.

Contrary to common misconception, it is crucial to understand that most blockchains are inherently pseudonymous, rather than anonymous. Every transaction on public blockchain is recorded on a transparent ledger, making the transaction history traceable. This traceability can serve as a powerful tool for law enforcement. This perpetual audit trail enables authorities to trace illicit activities back to their source.

The UK’s ambition to position itself as a global hub for crypto innovation is commendable, and is one of the main reasons that growth of crypto in the UK has far outpaced the likes of the US, Germany and Japan in recent years. However, striking a balance between robust regulation and fostering innovation is crucial. Overly stringent regulations, arguably like we are seeing with the new crypto asset financial promotions regime, might stifle the growth of the sector, pushing innovators and investors towards more accommodating jurisdictions instead.

The emergence of crypto-related crimes underscores the need for a comprehensive educational push. Regulatory bodies, in conjunction with the industry itself, need to work towards educating law enforcement agencies, financial institutions, and the general public in what is a nascent and constantly developing technology.

It is also crucial to recognise that the relevance and utility of crypto assets differ across global contexts. For someone in a developed, politically stable country, the urgency or use case of crypto may not be plainly obvious. However, for individuals in countries with economic instability, hyperinflation, or restrictive financial systems, crypto offers a lifeline and can serve as an alternative financial system, providing financial inclusion and allowing people to preserve their wealth against devaluing local currencies. Dismissing crypto merely based on their irrelevance to certain regions or occasional misuse overlooks their broader potential and global impact.

Understanding and leveraging the technology of crypto assets and their underlying blockchains require a nuanced approach that recognises their potential use cases as well as the need for adequate regulation to mitigate misuse.

For more information on our Blockchain and Digital Assets services, click here

Lawrence Stephens promotes two to joint Heads of Family

Posted on: November 22nd, 2023 by AlexT

Lawrence Stephens is pleased to announce the appointment of Senior Associates Eleanor Wood and Jim Richards to joint Heads of their Family practice.

With the appointment of Eleanor and Jim to joint Heads of practice, Lawrence Stephens reaffirms its commitment to continuing its high level of integrated legal advice to a diverse range of clients including high-net-worth and high-profile individuals, foreign nationals, non-domiciles, UK nationals living abroad, and multinational families.

Commenting on the new appointments, Steven Bernstein, Managing Director and Co-Founder of Lawrence Stephens, said: “We are delighted to announce Eleanor and Jim’s appointment as Heads of our Family department. This appointment marks our continued dedication to providing the very best service for our clients, and to growing our fantastic team.”

Ranked as a ‘Key Lawyer’ in The Legal 500 and an Associate To Watch’ in Chambers & Partners respectively, Eleanor works closely with clients on complex family issues, with a particular interest in Children Act matters, including cross-border relocation, change of residence applications and internal relocations, as well as divorce and matrimonial finance work, including the division of businesses and high-value properties.

Jim, who has over 15 years of extensive experience, specialises in a range of areas of family litigation involving a number of different assets and jurisdictions, particularly financial settlements and children cases. He was also previously a member of the Law Society Children’s Panel, working on complex cases where the children were parties to the litigation.

Working closely with the firm’s other departments on connecting matters such as sale of property, wills and probate issues, inheritance planning, dispute resolution and business restructuring, the Family practice will continue to offer a coherent and broad level of service to the Firm’s existing clients whilst drawing on the strength in depth of expertise across the team.

Eleanor Wood, Head of Family, commented: “I am thrilled to be heading up Lawrence Stephens’ Family practice. Working closely with the other fantastic departments at the firm, Jim and I look forward to continuing to provide first-class service to our loyal clients.”

Jim Richard, Head of Family, commented: “It is a pleasure to be joining Eleanor as Head of Family at Lawrence Stephens. Servicing the changing needs of our clients across a wide range of service, we pride ourselves on our collaborative approach and expertise.”

Steven Bernstein discusses leadership with FEBE founder John Maffioli

Posted on: November 6th, 2023 by AlexT

 

Speaking with the founder of the FEBE Growth 100, John Maffioli, as part of the Founder Stories series, Managing Director, Steven Bernstein, discusses the importance of creating a strong and collaborative company culture and how prioritising your people is the key to leading a successful business.

Prior to founding Lawrence Stephens, Steven and his co-founders were working at a corporate city firm, a highly competitive environment where employees lacked the confidence to make decisions over their fear of failure. As a direct response to this, they set up Lawrence Stephens with the aim of being a ‘people business’ – where employees are valued and a collaborative spirit is not only encouraged, but actively fostered.

Making the step from being a lawyer to becoming a CEO, Managing Director and ultimately a business leader, Steven also describes the balancing act he faced with doing the job he really understood (in being a lawyer) with doing the job he was still learning (in running a business).

However, by not taking themselves too seriously and fostering a people-focused company culture, Steven and his co-founders successfully grew Lawrence Stephens into the firm it is today – with these values remaining a crucial part of the firm’s identity and success. By allowing his team to learn, develop and thrive in a supportive environment, Steven explains the significance of this: “those are the Partners of the future, the owners of the future…”

The role of leadership also goes beyond fostering a powerful company culture, as Steven explains. Successful founders, entrepreneurs and CEOs must be constantly asking themselves as to whether they are making the right decisions, whether they are doing the right thing for their business. In driving a business forward, Steven explains that founders must show careful consideration to the risks and decision making if they are to succeed.

From the small office where Lawrence Stephens first began to the full-service firm it has now become, with the launch of departments such as its new Sports & Entertainment practice, Steven and his co-founders are looking to build on these successes to continue to grow the firm, strengthen existing areas and look at expanding further by bringing in talented teams of lawyers to cover new areas and provide a truly full-service experience to its clients.

Click here to watch Steven’s story in full. 

Crypto assets for businesses

Posted on: November 1st, 2023 by AlexT

The business landscape is continually evolving, with technology being a major catalyst for fostering progress, increasing capabilities, and maintaining a competitive edge.

Among the recent innovations capturing the interest of businesses is the rise of crypto assets and the blockchain technology that underpins them. Major brands such as Microsoft and Sotheby’s, as well as independent companies from travel agencies to cafés, are increasingly adopting crypto assets and harnessing their potential, seeking to position themselves to benefit immensely from these distinctive digital assets.

What’s in it for businesses?

One of the main appeals of crypto assets is the swift and transparent payment transaction mechanism that they provide. In an age where cash payments are on a significant decline, the ability to facilitate fast, transparent and secure payments is appealing to consumers and businesses alike.

Additionally, transactions with crypto often attract fewer charges compared to traditional payment methods. Crypto assets do not require intermediaries to facilitate transactions and the elimination of these intermediaries like banks and payment gateways in favour of a decentralised verification system (in other words, the blockchain) minimises the costs associated with traditional payment processing. Also, by merit of being exclusively digital, crypto assets negate the need for physical payment infrastructures such as card machines.

An undeniable upside for businesses adopting cryptocurrency payment is virtually zero risk of chargebacks. With every transaction confirmed and immortalised on the blockchain forming a secure, tamper-proof and transparent record, they cannot be reversed. Consequently, businesses no longer need to wrestle with drawn-out, expensive chargeback processes.

Adopting crypto assets also offers a broader customer outreach. By bypassing traditional financial institutions, businesses can access the 1.7 billion unbanked population globally, as well as the 1.2 million unbanked individuals in the UK. Allowing for crypto asset payment also caters to the growing population of crypto asset enthusiasts,  granting a unique selling proposition amidst a competitive market.

Moreover, due to the borderless nature of crypto assets, such transactions do not require conventional currency conversions and can be sent to or from anyone in the world with a smart device and internet connection. This makes crypto assets an ideal form of payment for businesses that wish to expand their operations into new jurisdictions, without the usual friction points involved in optimising cross border payments.

What are the challenges for businesses?

Whilst there are a number of advantages for businesses, integrating crypto assets as a form of payment is not without its risks. One such risk comes from the fact that crypto assets are extremely volatile, and it is not unheard of to have massive fluctuations in a crypto assets value over a relatively small time frame of days and hours. This volatility can present challenges for businesses in being able to predict how much it will generate from crypto asset payments, and it can also expose the business to losses if the value of its crypto assets falls. In the same vein, it can also present opportunities for gains if there is an increase in the price action of a crypto asset.

For example, a retailer may sell an item for 0.035 Bitcoin (BTC), which at the time of writing is around £766. In the days after the sale the value Bitcoin may increase, such that 0.035 BTC is now worth £800. On the flipside, the value of BTC may decrease, such that the 0.035 BTC is now worth £735.

Another challenge is security. Whilst crypto assets are secured utilising complex cryptographic algorithms, they aren’t invincible against cyberattacks, phishing or fraudulent schemes. Thus, businesses using crypto assets need to be proactive in establishing robust cybersecurity defences and countermeasure procedures.

The developing regulatory environment around cryptocurrencies presents another challenge. As the legislative and regulatory landscape is still maturing, businesses adopting crypto assets as a form of payment may need to comply with unforeseen regulatory requirements and make an effort to stay informed of ongoing developments in this area.

However, with diligent planning and careful strategies, these challenges and risks can be substantially offset and mitigated.

What must businesses consider?

For businesses considering crypto asset integration, an effective policy and strategy should take into account the specific nature and operation of the business, its goods/services, geographical scope, and clientele. Particular consideration should be given the following points:

  • Choice of crypto assets: Given the plethora of cryptocurrencies available, it is important to consider which crypto assets in particular should be allowed to facilitate payment for the business. Important points to consider here would be the crypto assets stability, liquidity, popularity, and confirmation times.
  • Payment processing: It may be worth trying an external payment processor who can simplify the process of crypto asset acceptance, albeit at a cost. Alternatively, it is entirely possible to set up your own crypto payment processing system, but will require some technological expertise and knowledge.
  • Formulating guidelines: Businesses adopting crypto assets should have defined guidelines addressing transaction disputes, and refund mechanisms. There should also be procedures in place for handling price volatility, for example, through stablecoins or immediate fiat conversion upon receipt.
  • Continuous transaction oversight: Businesses allowing crypto asset payments will need need to be able to track, record, and report transactions for tax compliance. Crypto assets are taxable, and businesses will need to consider whether they choose to hold crypto assets on their balance sheet as an asset, or if they would rather liquidate the crypto assets to fiat upon receipt or at regular intervals.
  • Selecting an appropriate digital wallet: Considering the scale of operations, anticipated crypto holdings, and security requirements is vital when choosing a digital wallet. There are a variety of different wallets including cold wallets, hot wallets, custodial wallets, non-custodial wallets, multi-sig wallets and many other variations. It is important for businesses to choose a wallet which is compatible with their needs, and which they are confident with and able to keep secure.

How Lawrence Stephens can assist with your crypto challenges

While venturing into the world of crypto assets does bring its set of challenges and intricacies, the potential benefits are substantial. As with any business decision, prudent planning, accompanied by knowledgeable legal consultation, is key to ensure regulatory compliance and adept risk management.

At Lawrence Stephens, our team is adept at assisting diverse businesses in harnessing the potential of crypto assets. With our bespoke legal insights, we ensure your cryptocurrency adoption journey is seamless, safeguarded, and aligned with the developing digital finance sector.

Cryptoassets and taxation

Posted on: October 11th, 2023 by AlexT

For UK traders, investors and businesses dealing with crypto assets, it is important to understand the complex tax implications for this rapidly evolving sector. For many industry participants, the line between fact and fiction regarding the taxation of crypto assets is blurred, often leading to confusion.

Having clarity and understanding on the UK’s approach to the taxation of crypto assets is therefore vital for individuals and businesses to better plan their transactions and strategy, thereby optimising their tax burden.

The tax treatment of Crypto assets in the UK

The UK’s tax authority, HMRC, recognises that there are a number of different types of crypto assets, and have adopted a taxonomy that aligns closely with the FCA’s regulatory position. However, the tax treatment of crypto assets is dependent on the nature and use of the assets in question, as opposed to their classification.

To put to rest a common misconception, HMRC does not consider the buying and selling of crypto assets to be comparable to gambling. Whether a transaction can be properly characterised as gambling will be a question of fact and will instead be considered on a case-by-case basis.

Importantly, HMRC does not consider crypto assets to be currency, and therefore treats them as a traditional asset for tax purposes. Consequentially, profits made from crypto asset activities are taxable.

What taxes are applicable?

For individuals dealing with crypto assets, the two main types of tax applicable would be Capital Gains Tax (CGT) and Income Tax.

Capital Gains Tax

Capital Gains Tax is essentially a tax on the profit made when an asset that has increased in value has been sold or disposed. It is the gain that is made which tax is applied against, rather than the whole amount that it has been sold for. For example, if you bought Bitcoin at £16,000, and later sold for £25,000, the gain on which tax would be applied would be £9,000.

Disposal of crypto assets does not just include selling the crypto asset for fiat, but also trading it for another crypto asset, spending it on goods or services, or gifting it.

There is also an annual tax-free allowance, for such instances. For the 22/23 tax year, this allowance is £12,300, and for 23/24 it is £6,000. This means that gains up to the amount of the annual allowance are not subject to any CGT.

If the profits exceed this amount, then CGT will be payable on the amount above the tax-free allowance, with the rate payable depending on your taxable income.

Income tax

In some instances, crypto assets, and activities relating to them, can be treated as income in nature; for example, payment for services with crypto assets, receiving crypto assets as employee remuneration, or earning crypto assets from mining or staking activities.

In other circumstances, trading crypto assets may also be subject to income tax, especially if the trading activity is particularly frequent and regular. Again, whether an individual’s trading activity would constitute treatment as income for taxation purposes will be highly fact dependent and assessed on a case-by-case basis.

Crypto assets received by an airdrop might also be liable for income tax if the individual has taken an action in exchange for the airdrop, for example promoting or moderating the socials for a particular project.

In relation to mining or staking taxes, if the activity is professional in nature profits may be subject to income tax under trading income rules. If the activity is more casual, it would likely be subject to income tax as miscellaneous income.

If crypto assets are mined, then the amount of tax will be based on the value of the crypto asset at the time it was mined. If the mined crypto asset is later sold and its value has increased, there may also be CGT applicable on the profit made from the increase in value.

The rate of income tax payable would be dependent on the individual’s income for the particular tax year.

It is therefore important to keep detailed records of crypto asset transactions, as it is possible to reduce the gain, and therefore the tax burden, by deducting allowable costs such as transaction fees.

Cryptoasset tax treatment and businesses

For businesses engaged in crypto asset activity, the tax treatment would depend on the nature of activities and transactions. A business involved in crypto asset activity may be liable to pay a number of different taxes such as CGT, Corporation Tax, Income Tax, VAT, and Digital Services Tax. For example, if a business’s primary function is the trading of crypto assets, then profit and losses will be subject to corporation tax at the applicable rate.

The tax treatment of businesses will depend on the particular facts of its activities, and will take into account a range of factors.

Lost crypto assets

If the private key to a crypto asset wallet is lost, HMRC does not view this as a disposal of the asset. Whilst you may have lost access to the crypto assets within the wallet, you still technically own the assets.

However, in situations where there’s no realistic chance of recovering the crypto assets, it may be possible to file a negligible value claim and seek relief for a capital loss.

Gifts

Gifting crypto assets is viewed by HMRC as a disposal, and therefore will attract a tax liability in the form of CGT. In other words, you would be subject to CGT on the difference between what you originally paid for the crypto asset and its market value at the time it was gifted.

However, there are advantageous carve-outs when it comes to gifting crypto assets to your spouse or civil partner, as transfers between spouses/civil partners are not usually subject to CGT at the time of the gift.

Rather, the recipient takes on the original cost basis and will then be liable for any CGT if they later sell or dispose of the crypto assets.

Conclusion

Taxation and crypto assets can be a complex and nuanced area, with many considerations, and failure to report crypto gains or losses could lead to penalties and interest charges on unpaid tax liabilities.

It is therefore important to note that, although the nature of cryptoassets and the decentralised framework in which they operate allows for pseudonymity, HMRC has invested significant time and effort to ensure cryptoasset tax compliance.

HMRC has been known to request customer information from centralised exchanges, and also utilises technology and analytics to analyse data and transactions which can establish connections between cryptoasset wallets and transactions and the individuals behind them. 

With this in mind, it is imperative that individuals engaged in the crypto sector seek professional advice to ensure that tax liability is calculated correctly and is optimised in line with their strategy and objectives.

Mohit Pasricha comments on legal challenges to refereeing decisions in the Evening Standard

Posted on: October 5th, 2023 by AlexT

In light of Liverpool FC looking to challenge a controversial VAR decision, following a game against Tottenham Hotspur, Director and Head of Sports & Entertainment Mohit Pasricha comments on potential legal options for the club.

Mohit’s comments were published in the Evening Standard, 5 October 2023, and can be found here.

“Whilst the PGMOL have admitted a significant error occurred, Liverpool are ultimately facing an uphill battle to succeed in any legal claim.

Any case would need to establish whether human error directly affected the outcome of the game (which is not evident) or potentially Liverpool’s final position at the end of the season (which cannot be determined now).

Allowing a successful claim based on human error could set a dangerous precedent and potentially open the floodgates for other clubs to make similar challenges, making it highly improbable for any such claim to prevail.”

Asim Arshad comments on crypto regulation in CoinDesk

Posted on: October 4th, 2023 by AlexT

With many crypto firms suspending their services in the UK, Senior Associate Asim Arshad comments on the FCA regime concerning the investment of crypto assets.

Asim’s comments were published in CoinDesk, 4 October 2023, and can be found here.

“Essentially, all communications to U.K. consumers in relation to crypto assets which could be seen as an invitation or inducement to invest, must comply with the rules.”