Cloud Services Market Investigation 

The UK public cloud services market is being investigated by the Competition and Markets Authority (CMA) to address potential competition concerns. This follows Ofcom’s referral, which identified issues with the market and problematic behaviours from cloud services providers (CSPs).

The investigation reflects the CMA’s broader strategic functions to promote competitive digital markets and tackle unfair behaviour where businesses are increasingly reliant on cloud solutions for their operational needs.

The CMA’s investigation is expected to conclude in April 2025.

How could it impact your business?

Several market features and business practices are firmly under the CMA’s spotlight, including technical barriers (interoperability and data portability), fees for transferring data outside of a CSP’s infrastructure (termed 'egress fees'), committed spend discounts, and certain harmful software licensing practices.

Often, following conclusion of an investigation, the CMA will seek to impose conduct requirements on providers to remedy the anti-competitive practices identified as a result of the investigation. In its issues statement the CMA proposes several remedies, including increased interoperability between providers, preventing or capping egress fees, prohibiting committed spend discounts and bundling, and increased price transparency.

The CMA’s recommended remedies will be welcomed by customers as, if adopted, customers will receive clearer pricing from their CSPs, and have greater options for switching between providers should they be dissatisfied with their service or pricing options.

Customers will also see fairer contractual terms from CSPs, reducing contractual risk and offering increased rights to customers, for example, more flexible software licensing provisions and increased data portability rights.

What steps should you take?

Businesses looking to renegotiate the terms of their cloud services contracts should look at their current contract and identify when renewals need to take place and prepare a negotiating strategy.

With the expected rebalancing of the negotiating table, larger corporates may find that they have increased scope when negotiating contracts with their CSP, resulting in more balanced contracts and increased abilities to port data to other CSP infrastructure. Customers could seek to leverage the proposed CMA remedies as a negotiating tool, to try securing the best terms possible prior to the remedies coming into force, CSPs are more likely to be amenable to these discussions in an attempt to demonstrate ‘good behaviour’ to the CMA.

Whilst the CMA has until 4 April 2025 to publish its final decision, we expect CSPs to take this investigation seriously and begin adapting their business models and cloud services offerings, benefitting customers, and representing an opportunity to get cloud contracts right.

Right to Repair Directive (R2R)

The Right to Repair Directive (R2R) is making its way through the EU legislative process and is expected to come into force imminently. Once the legislation is passed, businesses caught by the R2R will benefit from a 24-month implementation period to bring their policies into compliance.

The R2R will require manufacturers to repair free of charge (or for a reasonable cost) in-scope products sold to consumers in the fast-moving consumer goods and consumer technology sectors outside the warranty period. The non-exhaustive list of products caught by the R2R includes:

• Household washing machines, washer-dryers and dishwashers;

• Refrigerators;

• Electronic displays;

• Welding equipment;

• Vacuum cleaners;

• Servers and Data storage products; and

• Mobile phones, cordless phones and tablets (Products).

How could it impact your business?

Businesses selling products in-scope to EU consumers are likely to be caught by the R2R.

For manufacturers using an authorised representative in the EU, in the absence of any contractual arrangement to the contrary, the authorised representative will be responsible for the repairs. In the absence of an authorised representative, the obligation will fall on the importer, if applicable, and on the distributor as the last resort. If a UK based entity sells direct to EU consumers, it will itself be caught by the R2R obligations.

Businesses caught by the R2R must provide repairs (or engage a sub-contractor to repair) free of charge (or for a reasonable cost), within a reasonable time and provide a further one-year guarantee from the date of repair. Consumers will have the right to borrow a device whilst theirs is being repaired. Additionally, manufacturers must make spare parts and repair related information available to repairers.

Failure to comply carries the risk of penalties and fines, although not specified yet, and could also present a litigation risk.

What steps should you take?

In the first instance, Businesses should identify whether their activities are likely to be caught by the R2R.

If caught, businesses should review their T&Cs, warranty and guarantee policies to ensure compliance with their obligations, and add compliance with R2R into existing ESG strategies. For businesses with distribution networks, now is a suitable time to review distribution agreements to determine if they contain existing repair obligations and set out clear repairing responsibilities if not provided for already. The R2R contains a 24-month transition period but, as always, we would recommend starting the process early.

Businesses caught by R2R should also review their policies and procedure relating to spare parts, repairs information and repairing tools. Each of which must be readily available to ensure consumer choice between repairs providers.

For those businesses not caught by R2R at present, demonstrating compliance with R2R may present an opportunity to show commitment to sustainability and the circular economy, whilst futureproofing against any broadening of the scope of the R2R.

Non-financial information reporting framework

The government is looking to reduce the burden of regulation on small and medium-sized companies and intends to lay legislation this summer to lift the monetary thresholds that determine company size by 50% to take account of inflation and, later this year, to consult on further changes to the corporate reporting requirements, including on ESG metrics, for medium-sized companies.

The government has also committed to removing certain requirements from the directors' report and the directors' remuneration report and policy, making it easier for companies to issue digital annual reports, as well as correcting certain 'technical issues' that have been identified in the audit regulatory framework following the assimilation of EU law into UK law.

How could it impact your business?

A change in the thresholds could mean your reporting requirements might be relaxed dependent on whether your company is a mid-sized company subject to new regulations, or because of the changes in determination of a company’s size.

What steps should you take?

Be alive to possible future changes to reporting requirements, especially if your business is on the cusp of falling into a different bracket, to ensure you are reporting correctly based on the size of your business.

Plan and Budget

The FRC published its Plan and Budget for the 2024-25 year.

One aspect is focused on finalising the review of the UK corporate Governance Code and guidance. There is also commentary on simplifying corporate reporting and bringing UK’s sustainability reporting framework in line with international standards.

How does it impact businesses?

The corporate governance code has been a recurring feature in our updates, as this sets out principles for directors to ensure the future success of their businesses. Corporate reporting and sustainability reporting are key topics at the moment with the intention of making company’s more transparent and sustainable.

What steps should you take?

Keep an eye out for changes to the corporate governance code, sustainability reporting and corporate reporting to ensure your business remains compliant with the regulations.

ICO’s stated priorities for 2024

The Information Commissioner’s Office (ICO), the UK’s data protection regulator, has indicated four priorities for this year. These are as follows:

1. Cookies and adtech on user privacy;

2. The use of biometric data in employment contexts;

3. Safeguarding children’s privacy in the digital age;

4. Responsible AI practices.

We anticipate that these will be key areas of focus for ICO investigations and potential enforcement action for non-compliance for UK businesses in the coming months.

How could it impact your business?

Cookies and adtech on user privacy 

This will be particularly relevant for marketing, website development and IT departments tasked with website maintenance. Rules on cookie consent mechanisms are strict, and whilst we anticipate possible relaxation of these rules for non-intrusive cookies as mentioned in previous updates, for now the current requirements stand. The ICO audited 100 top UK websites and found 53 were non-compliant, stressing the importance of user-control, informed choice, and a prominent option to reject non-essential cookies.

Biometrics in employment contexts 

Of interest to any business processing biometric data in the employment sphere will be the recent Serco case. The ICO has issued an enforcement notice to Serco Leisure and associated organisations to cease the use of facial-recognition technology and fingerprint scanning (both requiring the processing of biometric data) to monitor employee attendance. Investigations found this processing to be unlawful, citing failure to properly risk assess the activity and establish lawful grounds for processing this data at the outset.

Safeguarding children’s privacy in the digital age 

Businesses with an online presence, with an audience involving children, should be aware that this has been stated as a current focus for the ICO. Particular topics include the importance of establishing the child’s age and taking steps to verify it. Resources such as the ICO’s Children’s Code and the new Online Safety Act will be particularly useful in this space.

Responsible AI practices 

AI remains a key priority and we are seeing increasingly comprehensive guidance from the ICO on this topic. The recently published second chapter of its draft generative AI guidance offers direction as to how the principle of ‘purpose limitation’ (using data only for purposes originally intended and stated) should be applied throughout the lifecycle of a project involving AI generated content.

What steps should you take?

We would urge businesses using these technologies to review current practices against current requirements.

The large majority of businesses deploy website cookies and non-compliance is immediately obvious to the ICO or anyone with knowledge in this space, particularly if the option to ‘reject’ cookies is hidden or less prominent than the ‘accept’ option.

Any business using biometric data should ensure that its use was risk assessed within a DPIA, and that both a ‘lawful basis for processing’ and ‘additional condition for processing’ have been identified.

Online sites and services used by children must be kept under review to ensure compliance with guidance and legislation and to ensure they are ‘age appropriate’ – this is only possible if the service includes measures to establish and verify age.

As use of AI involving personal data becomes increasingly widespread, such activities must be properly risk assessed against the latest guidance, and have privacy ‘baked in’ from the outset.

Non-compliant use of such technologies can give rise to regulatory enforcement action or complaints from disgruntled individuals, in each case leading to potential financial consequences and reputational damage.

The Draft Economic Crime and Corporate Transparency Act (Financial Penalty) Regulations 2024

The Draft Economic Crime and Corporate Transparency Act (Financial Penalty) Regulations 2024 have been published and laid before parliament.

The new regulations are set to come into force on 2 May 2024 if made on or before 1 May 2024. Otherwise the regulations are due to come into force on the day after they are made.

How could it impact your business?

As mentioned in our January 2024 Horizon Scanning, the Act introduces a framework for imposing financial penalties on a person that engages in conduct amounting to a relevant offence, under section 1132A of the Companies Act 2006. It sets out how financial penalties will be calculated, either on a daily rate or on a multiple fixed penalty basis. The maximum financial penalty that can be imposed by the Registrar of Companies under the Act is £10,000. The Act also outlines the process for warning and penalty notices, variation and revocation of financial penalties and appeals against notices.

The scope of the Act extends to England, Wales, Scotland and Northern Ireland and demonstrates commitment by the UK to a unified approach against economic crime.

Amendments to the Register of Overseas Entities (Penalties and Northern Ireland Dispositions) Regulations 2023 clarifies that a financial penalty cannot be imposed where there are proceedings ongoing, or a conviction obtained.

What steps should you take?

Businesses should familarise themselves with the impending changes under the Draft Economic Crime and Corporate Transparency Act (Financial Penalty) Regulations 2024 and the new offences under Section 1132A of the Companies Act 2006. If necessary, organisations should prepare and implement measures to avoid the risk of an investigation and prosecution under these new offences.

New guidance on supporting workers experiencing menopausal symptoms

The Equality and Human Rights Commission (EHRC) published guidance last month to help employers understand their legal obligations in relation to supporting workers experiencing menopausal symptoms.

The new guidance provides advice on how employers can support employees with menopausal symptoms, for example by having open discussions with employees and making reasonable adjustments. Employers can find advice on the steps they can take to comply with their legal obligations and potentially, in doing so, mitigate the risk of employees bringing a disability discrimination or complaint against them.

How could it impact your business?

At the moment, the Equality Act 2010 gives protection to workers against unlawful direct and indirect discrimination, harassment and victimisation on the basis of various protected characteristics, including, age, disability, religion or belief and sex.

The menopause itself is not covered by the Equality Act as a protected characteristic in its own right, or as a disability. That said, the new EHRC guidance clarifies that where a woman’s ability to carry out normal day-to-day activities is impacted substantially and in the long-term by her menopause symptoms, the symptoms could be considered a disability under the Equality Act. Where this is the case, employers are legally required to make reasonable adjustments to try to make sure the employee is not substantially disadvantaged. In addition, employers will be under a legal obligation to not directly or indirectly discriminate because of the disability, or to subject the woman to discrimination arising from disability.

This focus on increasing awareness may result in employers finding it more difficult to argue that they did not have actual or constructive knowledge of a worker’s potential disability, where that individual is visibly experiencing menopausal symptoms.

Employers should therefore look to take proactive steps to address these issues.

What steps should you take?

Employers could face employment tribunal claims being brought by employees in connection with discriminatory policies, or a failure to make reasonable adjustments to deal with menopause symptoms.

To try to minimise claims, employers should boost understanding of the menopause and the common symptoms within their organisations, introduce or update their menopause policy, train staff to treat colleagues with sensitivity and ensure that everyone is aware of how they can raise any concerns.

To be, or not to be (in the office)

The question of whether an employer can legitimately turn down an employee’s request to work exclusively from home was examined in the recent Tribunal case of Wilson v Financial Conduct Authority (FCA).

Here, the Claimant, a long serving senior manager, brought a claim against the FCA after it turned down her request to continue to work from home after the COVID-19 pandemic. The Claimant wanted to work exclusively from home and cited her high performance whilst working from home up to that point. In her view, excellent IT overcame any barriers to fully remote working, however the FCA had not shared this same view.

The Tribunal rejected her claim with the Judge cited her senior position, commenting on the limits that remote working can pose to “the ability to observe and respond to non-verbal communication that may arise outside of the context of formal events but which nonetheless forms an important part of working with other individuals.”

How could it impact your business?

The Tribunal’s decision is a help to employers thinking through minimum standards of attendance in the office (and the reasonings that underline them). It highlights that a manager’s responsibilities towards colleagues can be taken into account when considering flexible working requests to work mainly, or exclusively, from home.

What steps should you take?

Whilst the Claimant didn’t raise indirect discrimination as an issue in her claim, employers should think about how they could objectively justify any policy which indirectly discriminated against women (or any other protected group). Where the same objective can be achieved in a less discriminatory way, the Tribunal will likely expect that option to be taken.

As we have covered in previous updates, from 6 April 2024, employees will have the right to make a flexible working request from their first day of employment. Further changes are scheduled to apply from July 2024 b­­ut expected to come into force in April (albeit the date is yet to be publicly confirmed by the Department for Business and Trade). These include the following:

• a reduction in the time limit for employers to respond to any request (and consider any appeal) from 3 to 2 months;

• employees will be able to make up to 2 requests in a 12-month period;

• employees will no longer be required to explain what effect their request will have on the employer, or how the impact might be dealt with; and

• employers will be required to consult with employees on their requests before they are rejected.

The main preparatory steps for employers to take will be to ensure that policies are updated to reflect the changes, and to brief any managers who will be dealing with employees’ flexible working requests.

Draft Code of Practice on dismissal and re-engagement published by the Department for Business and Trade

Following a government consultation in response to the scandal over the firing of 800 workers by P&O Ferries in March 2022, the Department for Business and Trade has recently published new draft statutory guidance on the covering the practice of ‘fire and re-hire’.

Now something of a well-worn term in the media, ‘fire and re-hire’ refers to the practice of changing employees’ terms and conditions of employment (typically where their consent is not forthcoming) by way of dismissal and re-engagement.

This new proposed Code of Practice (the “Code”) will seek to strictly limit the circumstances where employers could fairly dismiss and re-hire employees in the future. It also carries the usual sting, in the form of the threat of an uplift of up to 25% to any compensation awarded by an Employment Tribunal.

Under the Code, employers will need to do more by way of information and consultation than is currently required of them in order to fairly dismiss employees and to avoid Employment Tribunals applying an uplift.

The Code awaits parliamentary approval and is expected to be brought into force “later in the summer”.

How could it impact your business?

The Code will introduce the requirement for employers to inform and consult in smaller-scale exercises. At present, employers are only obliged to inform and consult representatives where at least 20 dismissals are proposed at a single establishment within a 90-day period. A breach of this can lead to a protective award of up to 90 days’ actual pay per relevant employee. Under the new Code, there will be no minimum number of affected employees required for it to apply.

Employers will also be required, for the first time, to contact ACAS for advice prior to raising the prospect of fire and re-hire with staff. The Code also mentions that firing and re-hiring their staff to force changes to contractual terms and conditions should be used by employers only as a last resort.

Tribunals will be required to take the Code into account where it is relevant. As mentioned, the compensation for certain tribunal claims, including unfair dismissal, can be adjusted by up to 25% for breaches of the Code.

What steps should you take?

The new Code will not significantly change the law in this area, but introduces some additional requirements on employers, such as the obligation to contact ACAS before raising the prospect of ‘fire and re-hire’ with employees.

The Labour Party has committed to banning the practice of ‘fire and rehire’ as part of their pledge to overhaul employment protections, if elected, and so the new Code may precede a further and complete crackdown on the practice.

Climate Change

The Council of the EU has proposed alterations to the scope of companies who will be required to comply with the Corporate Sustainability Due Diligence directive. The scope now encompasses:

EU Companies

• More than 1,000 employees and a net worldwide turnover of EUR450 million

• EU ultimate parent companies of groups that reach these thresholds

• EU companies that entered into franchising or licensing agreements in the EU with independent third-part companies in return for royalties (Certain criteria are to be met)

Non-EU Companies

• Generate a turnover over more than EUR450 million

• Meet the criteria in relation to licensing and franchising agreements as EU companies, apart from the requirements in relation to royalties and net turnover

How could it impact your business?

For businesses that were not required to report before, it is unlikely you will be required to do so now, unless you fall within the remit of the franchising and licensing criteria or EU ultimate parent criteria, which are new introductions to the Corporate Sustainability Due Diligence Directive.

What steps should you take?

Review the scope of the directives and understand if your company falls within the criteria and, if so, understand the reporting requirements your company is subject to.

ESG News

Diversity on boards and Gender Equality

An update report has been published by The Parker Review on improving ethnic diversity of UK business. Following a review, the report has published the diversity of board and senior management of large UK companies. Encouraging progress is reported in improving ethnic diversity at board level by the FTSE 350 overall. The Review encourages those companies that have no ethnic minority directors to consider what they might be able to do to meet the target deadline of December 2024.

61% of private companies that responded to the review reported having at least one ethnic minority director on their main board in advance of the December 2027 target deadline.

The Parker Review hopes a greater number of private companies will respond in future years and engage with setting and reporting on targets for the proportion of ethnic minorities in their senior management by December 2027.

Another report has been published by the FTSE Women Leaders Review and shows a rise in Women on the boards of the 50 largest UK private companies and FTSE 100 companies. The percentage of women sitting on the boards of these companies has risen from 40.2% in 2022 to 42.6% in January of this year. For a second year, the review included 50 of the largest private companies in the UK, of which four did not submit data. It found that the representation of women on those boards was around 31%; and there were 18 boards that were either all-male or had only one woman.

Sustainability

The deadline for adopting European Sustainability Reporting Standards may be delayed for two years for certain sectors. The European Sustainability Reporting Standards provides common mandatory standards for large companies and listed SMEs to report on matters in relation to sustainability. The proposal to postpone the deadline by two years would mean the deadline for adopting sector-specific standards would be 30 June 2026.

Digital Markets, Competition and Consumers Bill

As stated in our Horizon Scanning last month, the Digital Markets, Competition and Consumers Bill (the Bill) is expected to receive Royal Ascent this year. As a result, the penalties available to authorities taking enforcement action in relation to green claims are set to rise.

The Bill confers new direct enforcement powers on the CMA in relation to misleading advertising practices, intended to act as a compliment to the role of the Advertising Standards Agency.

Although the Bill is not expected to come into force until later in the year, the CMA has already launched investigations into green claims in the fast-moving consumer goods sector including against Unilever.

How could it impact your business?

For businesses seeking to advertise their green credentials to consumers, the risk associated with getting it wrong will rise significantly once the Bill comes into force. Where businesses may currently receive a slap on the wrist from the ASA should their advertisements fall foul of advertising standards, once the Bill comes into force the CMA will have the ability to fine businesses up to 10% of group worldwide turnover for non-compliance.

In addition to fining powers for businesses, if individuals are found to have infringed the law, they could be liable for a personal fine of up to £300,000.

What steps should you take?

The CMA has released guidance for businesses looking to endorse their green credentials in a way that is compliant with the law (the green claims code). Businesses should review any green claims currently in circulation to ensure compliance with the code, removing any which may constitute an infringement, and seeking advice where needed. As a starting point, businesses should ensure all their claims are accurate, evidenced and a fair reflection of reality (i.e. are not in any way deceptive).

To ensure ongoing compliance, businesses should review their advertising procedures and approvals processes, and integrate elements of the green claims code where necessary. Whilst the Bill is still going through the legislative process, the CMA’s increased focus on ESG initiatives necessitates action sooner rather than later. For further details on how the CMA is focusing on sustainability, see our article on green agreements. 

Home Office draft set of the new Immigration Rules

The Home Office released their statement of change (Statement) on 14 March. This gives us an idea of the proposed changes to the current Immigration Rules (Rules), how they will look when they come into effect on 4 April 2024 and how these will affect businesses.

How could it impact your business?

The main area of impact is in relation to Appendix Skilled Worker. Before the Statement was released, it was unclear as to how Appendix Skilled Worker would look or what (if any) transitional arrangements would apply. The Statement has now made it clear that those applying under the Skilled Worker route after the 4 April 2024 will be subject to the new increased salary threshold of £38,700 per annum.

The statement of change has also outlined new the tradeable points and have stated where applicants can be paid less. One of these tradeable points is those who were granted permission as a Skilled Worker under the Rules that were in place before 4 April 2024. However, those who were not granted permission as a Skilled Worker under those Rules will be subject to the new salary requirements and tradeable points as set out in the Statement.

What steps should you take?

Businesses should be aware that if there are individuals that they wish to sponsor under the Skilled Worker route and their permission is not granted under the Rules that were in place before 4 April 2024, they will be subject to the large increase in salary required to sponsor these workers. This is unless they can benefit from one of the new tradeable points set out in the statement of change. They should therefore consider sponsoring these individuals as soon as possible to benefit from any transitional provisions available.

If individuals are not granted permission under the Skilled Worker route prior to the new Rules coming into force, and they are not being paid in line with the new salary threshold, their employer will need to consider potentially raising their salary or other immigration options, unless they can benefit from the new tradable points.

The risk to businesses is that they could potentially lose valuable and highly skilled members of their workforce due to these changes. They could also be open to indirect race discrimination allegations if they choose not to hire an individual because they require sponsorship under the new Rules.  

Breaching the Digital Services Act

The Digital Services Act (DSA) is European Union legislation that aims to regulate online intermediaries and platforms such as marketplaces, social networks, content-sharing platforms, app stores, online travel and accommodation platforms.

In February, the European Commission (Commission) opened formal proceedings against TikTok to assess whether they have breached the DSA following a preliminary investigation. The Commission has concerns in areas such as protection of minors, advertising transparency, data access for researchers, as well as the risk management of addictive design and harmful content.

These proceedings will focus on the DSA obligations related to assessment and mitigation of risks arising from TikTok’s use of algorithmic systems that may have potential bad side effects on users (such as behavioural addictions and/ or create so-called ‘rabbit hole’ effects).

As a result of the proceedings, TikTok is expected to:

• put in place appropriate and proportionate measures to ensure a high level of privacy, safety and security for minors;

• provide a searchable and reliable repository for advertisements; and

• increase transparency in the platform (following researchers being unable to assess ‘publicly accessible data’.

How could it impact your business?

It is likely that we will see ramifications from these proceeding for all businesses who engage with their consumers using social media or who produce platforms for engagement. Increasingly, we are likely to see restrictions on the use of techniques which create addictive behaviours when engaging with platforms and an increase in transparency around online advertising.

Breaches of the DSA can come with disastrous consequences, with possible fines of up to 6% of worldwide annual turnover and even temporary suspension if the infringement persists and causes serious harm to users.

What steps should you take?

Businesses that are subject to the Act and provide services to EU customers should consider If their policies and practices are compliant with the obligations within the DSA.

Cross-Border Selling

In March, the Supreme Court released its judgment in relation to Lifestyle Equities (Lifestyle) v Amazon regarding whether Amazon infringed trade marks in the cross-border sale of goods on the internet.

Lifestyle are the owners and exclusive licencees of the UK and EU trade marks relating to the “Beverly Hills Polo Club” name and logo. They brought a claim against Amazon claiming that they targeted UK and EU customer by offering to purchase the goods on their USA website.

The claim, which was initially dismissed by the High Court, was heard by the Court of Appeal who concluded that the advertisements and offers of sale of the USA branded goods were targeted at EU and UK customers.

The Supreme Court unanimously dismissed Amazon’s appeal, upholding that it targeted consumers in the UK. It found that, whilst the goods were displayed on the USA website, they were made available to ship to the UK, with purchases being made from IP addresses located in the UK, in local currency and with a UK billing address.

How could it impact your business?

The decision in this case could impact any business that sells goods on the internet. They need to be aware of the possibility of breaching registered trade marks by offering goods for sale in territories they do have a commercial right to sell the goods in.

The court did note that customers from an overseas territory being able to assess the website is not enough to establish that the customer is being targeted. However, in this case, the page offered delivery to the UK and specified which goods can be delivered to the UK, even though the goods were accessed on the USA website.

What steps should you take?

Businesses need to be extremely careful selling products online to international customers, ensuring that they only do so in territories where they own the registered trade mark, or have authorisation from the owner.

It is advisable to review your website to ensure it is clear on what countries the goods can be sold in and where they can be shipped to.

Part 10 of the Levelling up and Regeneration Act 2023 

The LURA 2023 received its Royal Assent on 26 October 2023 and is expected to come into effect in the near future, with provisions coming into force on 31 March 2024 so as to enable regulations to be made under Part 10.

Part 10 of the Act allows a local authority to take control of vacant commercial premises and carry out a rental auction where a property has been empty for a year and it considers that the occupation of the premises for suitable high-street use would be beneficial to the local economy, society or environment.

How could it impact your business?

Local authorities will have the power to designate a street as a high street and an area as a town centre, which could result in landlords losing control of some vacant high street units. The local authority will have the power to let out the premises (where certain conditions are met) and the landlord will be bound to grant the lease on the agreed terms. It may be possible for the landlord to appeal the decision to auction the leasehold interest, so long as certain criteria are met. These criteria are set out in part 1 of Schedule 20 to the Act.

If the local authority does manage to find a tenant for the premises, and the landlord has not established the grounds to block the auction, a tenancy will be granted for a period of between one and five years. There are no minimum levels of rent provisions within the Act, meaning that the premises may go to a nominal rent tenant. Whether local authorities have the determination and resources to put this to practical effect will have to be seen.

What steps should you take?

If you are a landlord of premises situated in town centres or high streets, it is worth bearing in mind that the secondary legislation is expected this year, and you should review your portfolio accordingly.

If you are potentially a tenant of such premises, and if the local authorities are granted such powers, this may put you in a stronger negotiating position with the landlord if the unit you are seeking has been vacant for a year and is situated on a high street or in a town centre.

Russian Sanctions

New sanctions rules in relation to Russia came into force on 20 March 2024. Under the amendments to the Russian Sanctions Regulations (Council Regulation (EU) No 822/2014), any contracts that have a link to Europe and involve the export of restricted goods or services to a country outside the European Union (save for a small number of exempted countries including the UK and the United States) will have to include a ‘no re-export to Russia’ clause expressly prohibiting onward exports to Russia.

How could it impact your business?

The Regulations capture a wide range of goods and services within scope, including but in no means limited to: military and dual use technologies; electronic devices and components; telecommunications equipment; numerous chemical compounds; jet fuels; ball bearings; and digital cameras.

All contracts signed on or after the 20 March 2024 concerning the export or sale of goods from a member state of the European Union to a third country not exempted by the Regulations (exempted countries include the UK, the USA, Japan, New Zealand, South Korea, Australia, Canada, Switzerland and Norway) must include a no re-export clause.

The Regulations will also apply to any person who is a national of any member state, to any legal person which is incorporated or constituted under the law of a member state, and to any legal person in respect of any business done in whole or in part in the European Union. Contracts signed prior to 19 December 2023 have until 20 December 2024 to be brought into line with the Regulation.

Whilst penalties for non-compliance with the sanctions are not expressly set out in the Regulation (as infringements are enforced by EU member states, therefore varying between regimes) the EU is currently proposing a harmonisation of the penalties at an EU level. This includes fines of up to 5% annual group worldwide turnover, and up to five years imprisonment for individuals found to be in contravention of the Regulations.

What steps should you take?

Businesses should undertake a review of their contracts to determine whether any existing contracts will be caught by the Regulations. Any contracts which are caught by the Regulations should be amended to include a no re-export to Russian clause. This could be circulated as an addendum to most agreements to minimise time spent on administration.

In addition to amending the contracts, businesses should ensure that they can satisfy themselves that their due diligence and monitoring processes are adequate to comply with the Regulations, introducing new measures if necessary.

Any template or standard terms should be amended to include the option for inclusion of a no re-export to Russia clause. If there is any doubt as to whether the clause should be included, best practice dictates that the clause be included as a belt and braces approach.

Spring Budget 2024

On 6 March, the Chancellor delivered his spring budget and we have provided below some of the headlines:

• Corporation Tax: The headline corporation tax rate will remain at 25% for the financial year beginning 1 April 2025.

• Capital Allowances: The government is considering extending the generous full expensing allowances to include leased plant and machinery assets. This could significantly impact how businesses account for these expenses and potentially reduce their tax burden.

• Investment Zones: 6 new Investment Zones were announced with the aim of driving growth and investment in Greater Manchester, Liverpool City Region, North East of England, South Yorkshire, and West Midlands and Tees Valley.

• Research & Development (R&D) Changes: Though not included initially, R&D tax reliefs were restructured in the Spring Budget 2024. There were mentions of increasing funding for specific industries like Life Sciences, but these are likely grants or innovation programmes rather than changes to how R&D tax reliefs work.

How could it impact your business?

• Corporation Tax: By maintaining the headline corporate tax rate, this provides businesses with a stable tax environment for planning purposes.

• Capital Allowances: The potentially expanded expensing allowances could reduce your tax burden if you invest heavily in equipment. However, the extension of full expensing allowances is under consideration and may not be implemented.

• Investment Zones: If your business seeking to expand or set up in an Investment Zone, you may be eligible for significant tax breaks and streamlined planning processes.

• Research & Development (R&D) Changes: While R&D relief wasn't directly addressed, it's crucial to stay updated on changes affecting innovation-heavy companies.

What steps should you take?

Our tax team can review the full budget document and subsequent implementations (or lack thereof) to identify any areas that might affect your business operations.

If your business is located within, or considering moving into, an Investment Zone, or focused on Research and Development, we can also help you to access specific incentives and/or grants.