Food Update - February 2008
Food Update - a quarterly round-up of issues affecting the food sector
Do you employ non-uk nationals? A look at what’s on the horizon with employment specialist Joanne Kay
Property… How about your facilities? A look at what is currently affecting the industry and what is on the horizon with our property experts Shama Gupta and Heloise Horton
Regulations and more regulations…Are you compliant? A snapshot of current ‘hot’ topics with our regulatory expert, Lisa Gilligan
At a glance
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Do you employ non-uk nationals? A look at what’s on the horizon with employment specialist Joanne Kay
In November 2007, the Government published new measures to prevent illegal working. The measures introduced a new points-based immigration system for highly skilled migrants and a new licensing system.
Illegal working
From February 2008, the new points based immigration system provides strict penalties for employers who employ illegal workers. The Border & Immigration Agency (BIA) will be able to give on the spot fines of up to £10,000 for each illegal worker. Further, there is a new criminal offence imposed on those who knowingly employ an illegal worker.
An individual within the employing organisation who knowingly employs an illegal worker risks an unlimited fine and/or up to two years’ imprisonment. The new measures signal the Government’s shift in responsibility to employers to ensure that they do not employ illegal workers. The measures will place an additional burden on employers within the food industry. The employing organisation should consider the following steps:
• To carry out more detailed checks on candidates, i.e. the checking of essential candidate documentation
• Human Resources and managers to ensure they amend recruitment practices to comply with the new measures i.e. listing the essential candidates’ documents to be checked and amending disciplinary procedures to ensure disciplinary sanctions for failure to follow recruitment procedures; and
• Training for Human Resources and managers to ensure that they understand the new system
New immigration system
The current work permit system is being phased out in the first quarter of this year and is being replaced by a new points-based system.
The new system is to be phased in over the next 12 months. An employee wishing to sponsor an overseas national will have to be licensed. The licence is valid for four years. The responsibility of a licence imposes new duties which include keeping records and reporting the departure of employees. Licensed employers will also be responsible for informing the BIA of any employee failing to show up for work. Failure by the licensed employer to comply with the new duties could result in the employer’s licence being downgraded or withdrawn altogether.
We would recommend that employers:
• Familiarise themselves with the new system
• Update policies and procedures to ensure compliance and to incorporate the new duties imposed under the new licensing system
Further information can be obtained from the Border & Immigration Agency, www.bia.homeoffice.gov.uk
Property… How about your facilities? A look at what is currently affecting the industry and what is on the horizon with our property experts Shama Gupta and Heloise Horton
Finance
Are you making the most of Capital Allowances?
Capital allowances: proper use of capital allowances relief may reduce your tax liabilities. From April 2008:
• The main rate of writing-down allowances for plant and machinery will be down from 25 per cent to 20 per cent
• A new 10 per cent rate (down from 25 per cent) will apply to ‘integral fixtures’ (such as lifts and air-conditioning)
• First-year allowances will be replaced by a new annual investment allowance (100 per cent allowance for capital investment in plant and machinery, capped at £50,000 per year)
• Writing-down allowances on industrial buildings will be phased out during the next four years
• Long-life plant and machinery allowances up from 6 per cent to 10 per cent
Also, don’t forget
Enhanced capital allowances:
businesses may claim a capital allowance of 100 per cent of the cost of investments made in the first year for investments in environmentally-beneficial plant and machinery (for example water efficient equipment) - the Government hopes to encourage the reduction of energy consumption which in turn will lead to a reduction in carbon dioxide emissions.
Business rates for unoccupied premises:
from 1 April 2008 industrial and warehouse premises will get 100 per cent relief for the first six months they are unoccupied and then full rates become payable.
Energy efficiency
Are you energy efficient?
Air conditioning inspections are coming: the requirement is being introduced in stages from 1 January 2008 for systems with a maximum calorific output of more than 12kW. If the system is put into service after 1 January 2008, the first inspection must take place within five years of the system being put into service. If the system is in service before 1 January 2008, the date of the first inspection depends on the output of the system: systems with an output of more than 250kW must be inspected before 4 January 2009; systems with an output of more than 12kW must be inspected before 4 January 2011.
Energy performance certificates
• You will need to provide an EPC for a commercial building with a useful floor area of more than 10,000m² from 6 April 2008
• You will need to provide an EPC for a commercial building with a useful floor area of more than 2,500m² from 1 July 2008
Planning
From 6 April 2008 planning applications will need to be made on the new standard application form 1APP.
Environmental
Since 30 October 2007 non hazardous waste landfills will not accept liquid or untreated waste. Business must either treat their own waste or ensure it is treated by someone else, such as a waste management contractor, before it goes to landfill.
Landlord and tenant
The Code for Leasing Business Premises in England and Wales 2007 is designed to achieve a fairer balance between landlords and tenants and promote greater flexibility in commercial lease terms. The Code contains recommendations on issues such as the length of the lease term and break clauses, rent reviews and service charges.
If you are taking a new lease of premises, it is worth a look. Service charges are also dealt with in the official RICs Code of Practice launched on 1 April 2007.
Regulations and more regulations…Are you compliant?
A snapshot of current ‘hot’ topics with our regulatory expert, Lisa Gilligan
Corporate killing - legislation update
The safeguarding of employees, customers and members of the public against health and safety failures forms an integral part of directors’ and senior managers’ responsibilities. With the coming into force of the Corporate Manslaughter and Corporate Homicide Act 2007 on 6 April 2008, directors and senior managers are required to monitor and ensure that the implementation of health and safety procedures within the organisation is being managed effectively.
Whilst directors and senior managers are not directly at risk of conviction for corporate manslaughter, they should be aware that the Act will place a further burden upon them to consider their health and safety obligations. In particular, a failure to introduce and manage or organise an effective health and safety regime may give rise to potential disqualification from their office as a director.
Organisations found guilty of the new offence will be liable to various sanctions including an unlimited fine. The courts will also be able to impose a remedial order on an organisation directing that steps be taken to address their health and safety failures. The courts will have the power to impose publicity orders against organisations, requiring them to publicise their conviction and specify details of the offence. This is potentially extremely damaging to the reputation and goodwill of any organisation.
Directors and senior managers can already be prosecuted for gross negligence manslaughter/culpable homicide and for health and safety offences. The Act does not change this and prosecutions against individuals can be expected where there is sufficient evidence to bring such charges.
Food safety
Last year Cadbury Schweppes were fined £1,000,000 in a landmark case for failure to inform the Food Standards Agency (FSA) of a salmonella contamination in their chocolate. The contamination ultimately led to Cadburys being forced to withdraw more than one million bars of chocolate from retailers. This high profile case was the first incident of a company prosecuted for failure to notify the authorities about food safety concerns since the European General Food Regulations came into force. This case is significant for not only the food industry but enforcers and legal advisors alike. The case highlights the fact that when dealing with food safety concerns companies must involve the FSA.
However there is a delicate balancing act to achieve as companies need to be able to suggest to the FSA ways in which public safety can be maintained whilst minimising commercial impact.
Expensive product recalls may be avoided by establishing proportionate and reasonable plans to minimise public risk.
Any mitigating factors such as:
• The size of the batch affected
• Whether or not the concern is life threatening
• Steps already taken to rectify the problem should be drawn to the FSA’s attention
However the courts’ willingness to impose large fines and the risk of imprisonment does mean that companies have very little choice but to involve the FSA of any concerns however minor.
Due diligence
The FSA recently published a list of areas in which it intends to commission research. This includes mycotoxins, meat hygiene and food intolerance. Last year the FSA also issued guidance relating to mycotoxins in food.
Mycotoxins are naturally occurring toxins produced by mould growing on food crops, during productions and subsequent storage. They are found in a wide range of foods and particularly those that originate from those with climates of high temperature and humidity. The guidance offers advice and the official method of sampling cereals, dried food, ground nuts, nut products, products derived from nuts, spices, coffee, fruit juice, cider, milk, wine and apple products for mycotoxins.
The key factor for food business operators is the underlying responsibility to ensure that any food they place on the market is safe and that adequate food hygiene standards are in place.
Whilst the testing of reported foods for mycotoxins is not a compulsory requirement, regular samplings for mycotoxins in line with FSA guidelines should form an important part of a due diligence regime. If a food business operator is found to have placed food on the market contaminated by mycotoxins and therefore injurious to health or unfit for human consumption they would be liable to prosecution.
Labelling: new regulations came in on 23 December 2007 with a comprehensive list of allergens that must be indicated on the label when they or their derivatives are used as ingredients in pre-packed food or alcoholic drinks. There is a 12-month transition period, but all labels must comply by 28 December 2008.
Are your company cars, vans and vehicles smoke-free zones?
If work vehicles are used by more than one person, smoking is banned throughout the UK. The international ‘no smoking’ symbol must be prominently displayed in each compartment. Both drivers and management are responsible for ensuring the vehicle remains smoke free, with fines of between £200 - £2,500 for employers for any breach.
Let’s not forget mobile phones: staff should be reminded regularly to keep their mobile phones switched off when driving. It is illegal to use voicemail and to send text messages, as well as to use hand-held mobile phones. Staff should also avoid calling colleagues who are on the road and limit the amount of calls to hands-free phones.
Right ingredients ensure tasty deal
Last year we assisted Boston-based GW Padley Vegetables in the sale of its vegetable processing business to Pinguin Foods UK, the King’s Lynn arm of Belgian-listed food group Pinguin nv. Padley’s employed around 170 staff and supplied a number of big-name supermarkets with branded and own-label products.
Having acted for the Padley Group since the 1990s, Freeth Cartwright’s head of corporate finance, Karl Jansen was the natural choice to handle the sale for Padley’s. Karl Jansen commented: “Padley’s has been a key client of ours for a number of years, so it was great to be involved in this latest stage of their transformation from a major food producer.”
David G Padley, Chairman of Padley’s commented: “This move was another major development for us. We are grateful for the support and practical advice from Karl and his team throughout this period of change and for helping to bring the deal to a successful conclusion.”
Freeth Cartwright’s corporate finance team also played a key role on the 2004 sale of GW Padley’s poultry business, one of the largest in the UK with four processing sites and integrated agricultural supply chain, to international food group OSI.
Sweet success
In May, corporate finance specialist Philip Raven acted for Lincolnshire-based Jakemans (Confectioners) Ltd on its sale to the family-owned provider of health and nutritional remedies, Lanes Health. The sale has ensured Jakemans’ continued success. The manufacturer of a range of boiled and menthol sweets has recently celebrated 100 years of successful trading.
February 2008: new points-based immigration system. Introduces on-the-spot fines of up to £10,000 for each illegal worker. Work permit system to be phased out and replaced.
6 April 2008: statutory sick pay increases to £75.40 per week. Statutory maternity, adoption and paternity pay increases to £117.18 per week or 90 per cent of normal weekly earnings, if lower.
FREE Briefing: We will be holding a free briefing on the new law for employers in the food sector on 10 March 2008, 12.00-3.30pm at The White Hart Hotel, Boston, Lincolnshire. For details or to reserve your place, please contact Julie Scheller on 0115 935 1879 or email julie.scheller@freethcartwright.co.uk
For an informal chat, please speak to one of our specialists
Karl Jansen, Cumberland Court, 80 Mount Street, Nottingham NG1 6HH
Tel: 0845 634 9780
Fax: 0845 634 9803
karl.jansen@freethcartwright.co.uk
Mike Copestake, Floor 2, West Point, Cardinal Square, 10 Nottingham Road, Derby DE1 3QT
Tel: 0845 634 9791
Fax: 0845 634 9804
mike.copestake@freethcartwright.co.uk
David West, One Colton Square, Leicester, LE1 1QH
Tel: 0845 634 9798
Fax: 0845 634 9805
david.west@freethcartwright.co.uk