Finance Bill 2023-24

The Finance Bill 2023-24, introduced in the House of Commons on 27 November 2023, encompasses several measures outlined in the Autumn Statement 2023. Key changes include making the full expensing policy for capital allowances on plant and machinery permanent, simplifying R&D tax reliefs, and extending the sunset clause for the enterprise investment scheme and venture capital trust scheme until 6 April 2035.

Capital Allowances on Plant and Machinery: The government plans to extend temporary enhanced capital allowances, allowing companies to claim 100% FYAs on qualifying plant and machinery expenditure. Technical consultations for broader changes, including extending full expensing to leased assets, are underway. Legislation to remove the current 2026 end date will be introduced in the Finance Bill 2024.

R&D Relief: The current R&D Expenditure Credit and SME schemes will merge from April 2024 onwards in an attempt to simplify the system. The tax rate for loss-making companies within the merged scheme will be reduced to 19%.

How could it impact your business?

Companies investing in plant and machinery or engaging in R&D activities may benefit from the permanent full expensing policy and simplified R&D relief, potentially encouraging more investment in these areas.

What steps should you take?

Companies should review their capital expenditure plans and R&D activities, considering the potential impact of the changes. Engage with industry consultations to provide input on broader changes to capital allowances.

Financial Reporting Council’s Areas of Focus

The Financial Reporting Council's supervisory focus for 2024/25 includes priority sectors such as construction, food production, gas, water, multi-utilities, industrial metals and mining, and retail.
Key areas of focus include economic risks, climate-related risks, implementation of IFRS 17, and cash flow statements.

How could it impact your business?

Companies in priority sectors should anticipate increased scrutiny in corporate reporting reviews and audit quality inspections, requiring enhanced compliance measures.

What steps should you take?

Companies should enhance internal controls and reporting processes, especially if their business operates in priority sectors. It is important to stay informed about regulatory changes and adapt compliance measures accordingly.

Prospectus Regime for IPOs

In November 2023, draft Public Offers and Admissions to Trading Regulations 2023 were published, which will replace EU law and create a UK framework for public offers and admissions to trading.

The draft reflects minor changes to the draft Regulations published in July 2023 and include changes to FCA rules, as well as waiver or modification of the designated activity rules, procedure and right to refer to the tribunal, and transitional provisions.

How could it impact your business?

Any changes in the prospectus regime, may shift compliance requirements, impacting both the process and associated costs.

What steps should you take?

The new regulations will not come into force until the FCA has been consulted, however companies considering IPOs should stay updated on developments in the prospectus regime and adjust IPO plans accordingly. They should also seek legal and financial advice to ensure compliance with the evolving regulatory framework.

EU AI Act Update

On 9 December, the EU AI act took a further step closer to being enshrined in law. There were three core issues left that were being addressed, including possible exclusions on the prohibition of real time biometric identification systems, rules on fundamental rights impact assessments, and new provisions to manage foundation models.

The next step will be for the European Parliament and Council to adopt the provisional agreement, which is expected to happen early next year.

How could it impact your business?

The EU AI act follows a risk-based approach and classifies AI systems into different categories. These include minimal risk, high risk and unacceptable risk. Each category comes with different levels of obligations and guidelines that will need to be complied with.

Minimal risk will only include voluntary obligations whereas high risk systems will need to comply with strict requirements such as human oversight and a mandatory fundamental rights impact assessment. Unacceptable risk systems will be prohibited apart from when used in very limited exemptions.

New provisions have been added for general-purpose AI and foundation models. Foundation models must comply with transparency obligations before they are placed on the market.

Whilst the EU AI act is EU legislation there may be instances where UK based businesses will be caught by the provisions if their product is used in the EU. For example, UK software companies that sell software tools to EU customers.

What steps should you take?

Businesses that create AI systems should consider whether their products will be subject to the obligations contained within the act. If they are, an assessment on the likely risk category should be conducted and a detailed plan on the steps they intend to take to comply with any mandatory obligations imposed.

For those impacted, it is useful to note that some transition periods have been announced. These include six months for any prohibition requirements, 12 months for any general-purpose AI requirements and 24 months for anything else.

Data Protection and Digital Information (no.2) Bill

The Data Protection and Digital Information (no.2) Bill was introduced in March 2023 replacing the first version of the bill that originated back In July 2022. The bill is currently going through the legislative process with the second reading of the bill in the House of Lords having taken place on 19 December 2023.

The bill intends to amend the UK GDPR and Data Protection Act 2018 and change the current obligations imposed upon businesses. The aim is to streamline the data protection legislation in the UK and remove much of what the UK government calls the ‘red tape’ that subsists in the current legislation. 

How could it impact your business? 

The bill contains a large number of amendments that may affect the current practices and policies that businesses have in place. Some of these are summarised below:

Data protections principles
The bill intends to amend the lawful grounds for processing personal data. This will change the existing legitimate interest category to a ‘recognised legitimate interest’. The proposed ‘recognised legitimate interests’ are contained within annex 1 of the bill and the Secretary of State will be able to add or remove what sits under this category.

Data Subject Rights
Data controllers cannot currently charge for a data subject access request (DSAR) and face difficulties refusing to respond to a DSAR that appears to be an abuse of process. The bill plans to allow data controllers to be able to charge a reasonable fee for, or refuse to conduct, a data subject access request that is ‘vexatious or excessive’. Data controllers will only be required to conduct searches, in relation to a DSAR, that are ‘reasonable and proportionate’.

The controllers will also be allowed to ‘stop the clock’ on the DSAR response time if they are unable to respond without further information from the person making the request.

Data protection officer no more?
The requirement for overseas controllers who are subject to the UK GDPR to appoint a UK-based representative will be removed. A data protection officer will no longer be required and is to be replaced by a “senior responsible individual” who is responsible for data protection risks within an organisation.

Cookies
The current cookie pop ups people receive have been described by the government as ‘annoying’. They intend to remove the requirement to seek consent for “several low privacy risk purposes”.

Record keeping
The bill intends to remove the requirement to keep records of all processing activities relating to personal data, replacing this with a requirement to only create records of personal data “which, taking into account the nature, scope, context and purposes of the processing, is likely to result in a high risk to the rights and freedoms of individuals”. 

What steps should you take?

The bill is still on its judicial journey through the UK legal system and may be subject to further changes. However, businesses should be aware that the government does intend to amend the data protection legislation framework and be prepared to assess if they need to update any policies when the bill becomes an act of parliament.

A New Right to Time Off to Arrange Care

Employees will have the right to a week's unpaid carers leave under the Government’s Carer's Leave Act 2023 (Commencement) Regulations 2023.

The Carer’s Leave Act (which was brought into force by these Regulations on 4 December 2023) provides employees with the day one right to take one week’s unpaid leave (pro-rated) each year. Such leave is intended in order to provide or arrange care for a dependant with a long-term care need. As further guidance is expected on how this will operate in practice, however, employees are unlikely to be able to exercise this new right until April 2024.

The leave will be available to be taken either in one block or as single individual or half days. Employees will be able to self-certify their eligibility and won’t be required to provide evidence.

How could it impact your business?

As stated, detailed provisions about how this carer’s leave will operate in practice are still awaited, however the right will be available to employees who provide care for a dependent, the definition of which is as follows:

• the spouse, civil partner, child or parent of an employee;

• a person who lives in the same household as the employee (other than as boarder, employee, lodger or tenant): or

• a person who reasonably relies on the employee for care.

A long-term care need is defined as is defined as an illness or injury (either physical or mental) that requires or is likely to require care for more than three months, a disability under the Equality Act 2010, or issues related to old age.

What steps should you take?

It would be sensible to try to get ahead of the curve by:

• preparing/updating policies to inform employees of the new right and how to request it;

• ensuring managers and supervisors are aware of the new right and are conscious that some employees may not want their colleagues/managers to know the specific reason for the leave;

• ensuring adequate systems are in place to keep a record of the number of days taken;

• creating a “self-certification” form so that employees can request the leave, confirm they meet the legal definition of a carer and confirm they will be using the leave to provide/arrange care; and

• considering whether to offer some/all of the leave as paid.

Employers can only postpone requested leave if they reasonably believe approving it would lead to undue disruption to the business. If the leave is postponed, employees must be provided with a written explanation within seven days of the request, explaining the reasoning and the revised dates for the leave, which must be within a month of the original request.

A New Duty to Prevent Sexual Harassment

The Government’s Worker Protection (Amendment of Equality Act 2010) Act 2023 will come into force in October 2024 and will introduce a new duty on employers to prevent sexual harassment.

Under the new legislation, employers will be required to adopt a proactive approach to root out sexual harassment. It is clear, if it wasn’t before, that employers can no longer rely on paper-based training (usually given once, or at best annually) and policies hidden in a staff handbook to prevent sexual harassment in the workplace.

How could it impact your business?

The new legislation amends the provisions on sexual harassment in the Equality Act by:

• creating a proactive duty that employers must take reasonable steps to prevent sexual harassment in the workplace; and

• giving Employment Tribunals the power to increase compensation awarded for sexual harassment by up to 25% where an employer is found to have breached the new duty to prevent sexual harassment of its employees.

The language used of “reasonable steps” in this new duty may be familiar, but the key thing to remember is that it is an additional legal duty. This means that employers are not only expected, but legally required, to take proactive steps to prevent sexual harassment in the workplace.

Employers who are found to have breached the duty by an Employment Tribunal will no doubt attract unwanted media attention.

Companies should be aware that the Tribunal’s discretion to award uncapped compensation for sexual harassment will be increased further by the 25% uplift where there has been a failure to adhere to the new duty.

What steps should you take?

The Equality and Human Rights Commission (“EHRC”) will provide a statutory code detailing what is expected of employers. Based on existing case law, however, examples of steps that should be taken include:

• implementing a new, tailored and effective anti-harassment policy (and raising awareness of it);

• implementing workforce training on the approach to the policy (to include management); and

• keeping records of the training.

Employees will need to be encouraged to report sexual harassment when they see it and all complaints must be thoroughly, and formally, investigated with appropriate action taken.

The Government’s aim with the new duty is to shift from a tick-box culture to more genuine action, with proper input and responsibility from senior management and leaders.

Whilst the Act does not come into force until October 2024, it would be sensible to lay the groundwork now. Proactive steps should be taken to avoid all discriminatory behaviour in the workplace (not just sexual harassment) and to promote inclusion and diversity, as the two go hand-in-hand.

Collective Bargaining in the Gig Economy

A recent ruling by the Supreme Court upheld the decision that Deliveroo Riders were not entitled to employment protection as employees (or as part of a wider class of “workers” which also attracts employment law protection).

In reaching the decision, the Court highlighted that Riders are entitled to appoint a substitute to undertake a delivery job on their behalf, they are also not penalised for declining jobs, do not have to work specific hours, and are free to work for competitors. It found that the arrangements Deliveroo has in place with its Riders were “fundamentally inconsistent with any notion of an employment relationship.”

As a result of the decision, Deliveroo Riders were accordingly unable to seek recognition of a trade union (the Independent Workers Union of Great Britain) in their workplace.

How could it impact your business?

The judgement by the Supreme Court has helped to define the boundary of where labour relationships are simply too casual to attract employment law protection. In addition to Riders’ ability to appoint almost anyone to take a particular delivery job, the Court also highlighted the following a relevant factors in its decision:

• Riders do not have to carry out any deliveries at all;

• Riders do not work within specific working hours. They operate if and when they choose;

• Their place of work is not specified or agreed;

• Their activity is not of a particular duration, nor does it have a certain continuity. Riders start and stop when they choose;

• They are not required to be available;

• As regards tools, materials and machinery, all equipment is at the Riders’ expense;

• There is no periodic payment. Remuneration depends on whether Riders choose to make deliveries and how many they make;

• Deliveries are not necessarily or typically their sole or principal source of income. Even where they are, a goodly proportion may earn from Deliveroo’s direct competitors, potentially by undertaking the competitor’s work in preference;

• There is no payment in kind such as food, lodging and transport;

• There is no entitlement to weekly rest and annual holidays;

• There is no reimbursement for the cost of travel; and

• There is no protection from financial risk for Riders, whether in the form of insurance, guaranteed earnings or otherwise.

What steps should you take?

The facts in Deliveroo are at the extreme end of labour provision as most skilled labour cannot be provided by casually chosen substitutes and there is normally a minimum amount of work required from most employees and workers.

However, considering this decision, it is worth re-examining the terms on which casual workers are engaged and whether they fit within this limited exception or should be granted rights more consistent with personal service and worker status, including Equality Act rights, National Minimum Wage, holiday and pensions rights amongst others.

Reminder on Redundancy from the Employment Appeal Tribunal

In the recent case of De Bank Haycocks v ADP RPO UK Ltd, the Employment Appeal Tribunal held that an employee’s dismissal for redundancy was unfair due to a lack of meaningful consultation at the formative stages of the redundancy process. It found that Mr De Bank Haycocks was not provided with adequate information and so he could not have any meaningful impact on the decision.

How could it impact your business?

This decision reaffirms existing authorities on how employers should conduct a fair redundancy process. An important general principle is that consultation in a redundancy situation should take place at a formative stage where an employee or representative is given adequate information and time to respond, and genuine consideration must be given to the response.

A reasonable employer should also seek to minimise the impact of a redundancy situation by way of limiting numbers, mitigating the effect on employees, or avoiding dismissal altogether by engaging in consultation.

Furthermore, it was highlighted in this case, that employers should use a system which reflects the usual practice in the UK, even where this may be different to the method used across the wider organisation internationally.

What steps should you take?

The decision in this case emphasises that where a Tribunal is deciding whether a dismissal by reason of redundancy was fair, the consultation process will be crucial. This applies even where the collective consultation obligations do not apply.

Employers should therefore be clear on their consultation obligations at the outset, seeking legal advice if unsure. It is important to note that minor errors may be amended on appeal, but where there has fundamentally been a lack of effective consultation it becomes much more difficult.

Employers should fully engage with employees to evidence that a fair consultation process was followed and minimise the risk of an employee bringing a Tribunal claim.

COP28 

The United Nations Climate Change Conference (COP28) was held on 30 November 2023 to 12 December 2023, bringing together participating countries to negotiate and agree action on how to tackle climate change. 

At the conference, all parties agreed to accelerate the transition away from fossil fuels this decade. A target was set to reduce emissions by 43% by 2030 and set a pathway to achieve net-zero by 2050. This agreement was in line with targets set at a previous conference (COP21) to limit global temperature increase to 1.5 degrees Celsius. 

How could it impact your business?

This commitment from participating members is particularly striking, due to this being the first time the COP conference had called out the use of fossil fuels.This, and the ever-present deadline of achieving net-zero by 2050, should be on the minds of businesses who produce/consume fossil fuel as part of their processes. 

Despite this agreement being widely praised, the language used within it is loose and does not impose positive actions on the agreeing parties. The agreement called for parties to shift energy systems away from fossil fuels in a just and orderly fashion. 

As part of the agreement, countries are called to the global transition effort, rather than being compelled to make this shift on their own. In fact, common language used throughout the document is “recalls”, “notes”, or “welcomes”. Therefore, the actual effectiveness has been questioned, and it will remain to be seen how those agreeing parties seek to comply with this. 

What steps should you take?

Businesses should be aware of the manner in which agreeing parties plan to implement the agreement. This will be at the forefront of policy making as discussions around net-zero continue and, as such, will bring with it widespread changes across a variety of sectors. 

With an agreement for further conferences to be held in Azerbaijan (COP29 - 11-22 November 2024), and Brazil (COP30 - 10-21 November 2025), the implementation of the agreement will be monitored, and non-compliance will be scrutinised and, as the COP28 president stated, “the true success of this agreement will be seen in its implementation”.

Environmental Audit Committee Report

The House of Commons' Environmental Audit Committee recommends mandatory transition plans (TPs) disclosure, regulations for TP development according to Transition Plan Taskforce guidance, regulatory expectations for TPs, and an independent mechanism for monitoring. It also suggests stakeholder guidance, an implementation timetable for Sustainability Disclosure Requirements, and the development of a UK carbon border adjustment mechanism.

How could it impact your business?

Businesses will likely face increased disclosure requirements and scrutiny regarding their transition plans and contributions to sustainability, affecting strategic planning and reporting practices.

What steps should you take?

Businesses should evaluate their environmental and sustainability practices, and develop and disclose comprehensive transition plans in line with regulatory expectations. They should continue to monitor and adapt to evolving sustainability reporting requirements, as well as considering the potential impact of a UK carbon border adjustment mechanism on your supply chain.

VAT Relief for Energy-Saving Materials

From February 2024, legislation will be introduced to expand VAT relief on energy-saving materials installation, covering additional technologies like water-source heat pumps. The aim of these changes is to promote energy efficiency.

How could it impact your business?

Businesses involved in energy-saving technologies or construction may experience changes in demand due to expanded VAT relief, impacting pricing and competitiveness.

What steps should you take?

Companies should evaluate the impact on their product or service offerings and consider adjusting pricing strategies, as well as exploring opportunities in the energy-efficient technology sector.

Board Composition

The Parker Review Committee has recommended that FTSE 350 companies set ethnic diversity targets for senior management by December 2023.
The 50 largest Private companies are directed by the Review Committee to have at least one director from an ethnic minority background on their boards by December 2027, with self-set ethnicity targets for senior management.

How could it impact your business?

Companies, especially those in the FTSE 350 and large private companies, must consider and take steps to address ethnic diversity targets for boards and senior management. This may impact recruitment strategies and corporate culture.

What steps should you take?

Companies should assess their current board and senior management diversity and develop strategies to meet diversity targets, whilst establishing transparent reporting mechanisms.

As consumers are increasingly more climate focused, business are under increased pressure to demonstrate that they are sustainable and ‘green’. The UK regulatory bodies are now increasingly scrutinising business’ sustainability claims in a bid to prevent greenwashing.

ASA (green marketing) Guidance and CAP and BCAP Environmental Advertising Guidance

The ASA has a new five-year strategy (AI assisted collective and regulatory) to ensure every UK advert is responsible. The ASA has provided guidance relating to green marketing to ensure the terminology used to promote initiatives to reduce environmental impact, green disposal claims, carbon neutral or net zero claims is not misleading. In high carbon sectors, for example, oil, gas, energy supply and companies with high carbon transport, the ASA implements high standards when referring to green claims. All advertisements are required to balance the green activities with the high carbon activities carried out by the business as a whole and provide clarity around any green plans, avoiding omitting any material information.

The ASA continues to invest in research into greenwashing and further research will be released in 2024 concerning consumer perception of meat, dairy and plant-based foods.

On 28 November 2023, CAP and BCAP also published environmental advertising guidance when making environmental claims and social responsibility, consolidating the ASA’s position.

How could it impact your business?

Whilst greenwashing claims are not sector specific and all companies should consider whether their sustainability claims are misleading when advertising, companies in sectors with high carbon emissions such as aviation, travel and fast fashion should be particularly aware of any sustainability claims they are making. By ensuring an honest, accurate and informative account is represented along the sustainability journey when making green claims, this will allow the consumers to make informed choices and is likely to gain the trust of the consumer.

Should these standards not be met, companies could face fines of up to 10% of global turnover if advertising claims are found to be misleading. Aside from the risk of fines, companies also risk reputational damage as consumers are likely to lose trust and feel misled.

What steps should you take?

Businesses should ensure they prioritise transparency and accuracy when making sustainability claims. They should ensure that they take a cautious approach to green claims, taking a more limited and realistic approach as to the sustainability journey, ensuring the claim can be substantiated by sufficient evidence and make clear any limitations (especially when referring to absolute green claims). Any claims to meet net zero or carbon neutral must be qualified, with material information such as a likely timeframe to meet net zero, or claims based on offsetting, being stated in the advertisement.

Each business should consider their audience and the likely interpretation of a claim, including how knowledgeable the audience is likely to be. For example, there are varying degrees of consumer understanding of the terms ‘recycle, recyclable, biodegradable and compostable” when referring to green disposal claims. Advertisers must also make it clear if environmental benefits will only result from specific customer action or behavioural change.

Be specific when advertising sustainability credentials and include the following information when advertising to consumers:

• which parts of the product the claim relates to;

• the products disposal process, how long it takes to biodegrade, how to recycle; and

• whether any harmful by-products are produced during disposal.

Advertisers must consider any adverse effects and must not mislead consumers about the environmental benefit of a product or service, as well as considering social responsibility when advertising products or services.

Digital Markets, Competition and Consumer Bill

The Digital Markets, Competition and Consumers Bill which is expected to receive Royal Assent in early 2024, will offer additional protection to consumers and give regulators additional powers to tackle greenwashing. This bill introduced a number of changes to consumer protection laws to improve and modernise consumer rights, including protection against false reviews, unclear subscription contracts and pressure selling. Companies with a global turnover exceeding £25 billion, or a UK turnover exceeding £1 billion, may have 'Strategic Market Status' (SMS) status. SMS designation can only occur after an SMS investigation which can take up to nine months.

How could it impact your business?

The bill proposes to give the CMA direct powers to impose significant fines:

• Breach of consumer legislation: Fines of up to 10% of global annual turnover for a business, or £300,000 in the case of an individual.

• Non-compliance with an information request: Fines of up to 1% of a business’ annual turnover, plus 5% of daily worldwide turnover where non-compliance continues. Where an individual fails to comply, the CMA can impose fixed penalties of up to £30,000, with an additional daily penalty of up to £15,000 where non-compliance continues.

• Breach of undertakings: Fines up to 5% of a company’s annual global turnover, with an additional daily penalty of 5% of daily turnover during non-compliance. For similar breaches by an individual, the CMA can impose fixed penalties of up to £150,000 and a daily penalty of up to £15,000 for each day a breach continues.

What steps should you take?

Should the Digital Markets, Competition and Consumers Bill come into force in late 2024, the digital market riles are likely to start to apply to SMS firms in 2025 due to the nine-month long designation process. All businesses and insurers with a digital presence should carefully review their procedures and practices to ensure the transition to an enhanced regulatory environment is as painless as possible.

Companies should carry out a thorough review of their due-diligence systems and advertising approval process, ensuring rigorous assessment of any high-risk adverts.

REMINDER - UK IPO Update to Overseas Owners or UK Trade Marks

In our September Horizon Scanning update, we highlighted the UKIPO proposed changes to overseas owners of UK trade marks.

The deadline for overseas owners of UK comparable trade marks to ensure that they have appointed a UK address for service was on 1st January 2024. UK comparable trade marks are rights that were created by the UKIPO as a result of Brexit to provide protection to earlier registered EU trade marks.

How could it impact your business?

In the event of contentious IP proceedings after 1 January 2024, where no UK address is listed, the UKIPO will write to the contact details they have for the owner informing them of the requirement to appoint a UK address for service within one month. If no address is provided within that time period, the trade mark could be revoked or declared invalid, losing any current IP rights the owner of the trade mark is entitled to.

What steps should you take?

Overseas businesses are advised to review their trademark portfolios and appoint a UK representative as soon as possible on any UK trade marks where one is not appointed. Representatives can act on behalf of the owners to ensure that important deadlines are not missed. 

These businesses should also review the current contact details that the UKIPO has on record and update them accordingly if they are dated.

Intellectual Property Office – Artificial Neural Networks Patent Guidance

The IPO has updated its statutory guidance for patent examiners following the high court case of Emotional Perception AI Ltd v Comptroller-General of Patents, Designs and Trade Marks [2023] EWHC 2948 (Ch), which was an appeal against an earlier decision by the IPO.

The case involved a UK patent application for a system which uses media files (i.e. music tracks or video files) to provide media recommendations to a consumer. The invention stated that the recommendations were produced by a trained artificial neural network (ANN), whereas similar solutions used humans to review the music.

Initially, a hearing officer for the IPO decided that the invention was excluded from patentability due to it being classed as a ‘program for a computer’ under Section 1(2)(c) Patents Act 1977. However, the judgement in the Court of Appeal concluded that, whilst the training of the ANN constituted a ‘program for a computer’, the trained ANN itself did not.

As a result of the judgement, the IPO has updated its examination guidance to state that patent examiners should not object to inventions involving an ANN under the ‘program for a computer’ exclusion of Section 1(2)(c) Patents Act 1977.

How could it impact your business?

For those businesses involved in the production of AI-related systems, this could be considered a big step forward in their ability to patent those systems. However, caution is advised as the UKIPO may appeal the decision.

What steps should you take?

Businesses should consider whether there are any AI-related systems that they use and assess if they could warrant patent protection.

Office of Trade Sanctions Implementation

The UK government has announced the creation of the Office of Trade Sanctions Implementation (OTSI), which will focus on the civil enforcement of the UK’s trade sanctions. 

Until now, breaches of trade sanctions have been the subject of criminal investigations and enforcement by the HMRC.  As evidence of the government’s ongoing commitment and focus on sanctions, OTSI will sit alongside (but not replace) the HMRC and will be empowered to conduct civil investigations and levy corresponding civil penalties (without having to reach the higher criminal standard of proof). 

How could it impact your business?

Although OSTI will investigate potential breaches across all regimes, it is widely expected that its focus will be on Russia and, in particular, those companies that seek to avoid sanctions by sending products to Russia via third party countries. 

The establishment of OTSI brings the enforcement of trade sanctions in line with the enforcement of financial sanctions in the UK, where there is already a dedicated department for the civil investigation and enforcement of financial sanctions by the Office for Financial Sanctions (OFSI) which sits apart from criminal investigative authorities of the National Crime Agency and Crown Prosecution Service. 

What steps should you take?

The ambit of OFSI’s powers remain to be seen as the full legal framework to its establishment is put in place.   For now, businesses should continue to monitor and assess their trade sanctions risks, bearing in mind:

1. where trade is conducted, particularly countries identified as those which continue to support Russia’s war (especially those identified in the UK government’s latest Red Alert: Belarus, China, Serbia, Turkey, the UAE and Uzbekistan);

2. the products provided; and

3. the end customer or user (due diligence is crucial).

New Russian Regulations

The UK government has introduced two new regulations (Amendments No 4 and 5) amending the Russia (Sanctions)(EU Exit) Regulations 2019 to widen the current restrictions on goods, technology and sources of funding currently prohibited under the regime.

The majority of amendments came into force of 15 December, with the remainder having come into force on 26 December 2023 and 1 January 2024. 

How could it impact your business?

Broadly speaking, the regulations cover the following:

1. Export restrictions: a wide range of additional goods have been added to the Schedules of items prohibited from export, supply and distribution to Russia, including household items, such as laptops and smartphones. Such a wide range has been added that the UK press release remarked that “in essence, only low-risk, humanitarian, food and health exports will remain unsanctioned after this”. 

2. Importation of metals: New restrictions have been imposed on the importation or acquisition of certain metals from Russia and the supply or delivery of metals from Russia to a third country. 

3. Importation of diamonds: new prohibitions have been introduced on the importation or acquisition of diamonds and diamond jewellery from Russia, as well as on ancillary services such as financial assistance and brokering, including to a third country.

What steps should you take?

Ultimately, any company doing business with Russia will need to conduct a very careful review of its goods and services involving Russia or persons connected with Russia.

Levelling-up and Regeneration Act 2023

The Levelling-up and Regeneration Act 2023 received Royal Assent on 26 October 2023 and Part 11 came into force immediately.

Part 11 of the Act provides the Secretary of State with the power to require information to be provided to the Chief Land Registrar regarding interests in land. 

Provided that the scope falls within one of the following permitted purposes: beneficial ownership; contractual control; or national security, the information required can include: 

• Details of the parties and anyone they act for (such as acting as a nominee or bare trustee) and their professional advisors

• Transaction terms

• Source of funds or other consideration given for the transaction

• Copies of documents evidencing the transaction 

Subsequent regulations will add the detail for who must comply, what information must be provided and when it must be supplied. 

How could it impact your business?

Transaction timetables could be impacted and therefore any requirement to provide information should be considered at the outset. Contractual terms will also likely be required to ensure compliance by the parties to avoid any issues or delays with registration. 

It is important to be aware that commercial terms may need to be disclosed to the Land Registry where, previously, a unilateral notice could be relied on to maintain limited confidentiality. It is currently unclear whether such terms would be published on a public register. 

The Land Registry will require compliance with the information requirement to be able to register transactions, notices and restrictions. Any delays caused by a failure or delay to provide the required information could see the registration gap increased between completing a transaction and registration when legal title vests in a purchaser or tenant. This could result in issues exercising rights that accompany legal ownership, such as serving notices to quit or break notices for leases. 

Failure to provide the required information is a criminal offence.

What steps should you take?

In addition to the considerations above, businesses should keep an eye out for subsequent regulations which will add to the detail to this new reporting regime.