Professional negligence time limits: The clock is ticking

If you have a professional negligence claim, it is crucially important that you are aware of the time limit or limitation period applicable to your claim. Once the limitation period expires, the negligent professional gains an absolute defence to the claim, and you cannot recover your losses.

Limitation periods exist because it is considered unfair for a defendant to remain exposed to potential claims in perpetuity. In addition, old, stale claims are far more difficult to run. The older the claim, the more likely it is that documents evidencing what happened will be lost or destroyed, and the memories of the people involved will fade. In the public interest, limitation periods have been applied to reduce the time period within which a claimant can advance a claim.

What are the limitation periods?

The various limitation periods are set out in the Limitation Act 1980. The main limitation periods relevant to professional negligence claims are:

  • Breach of contract: six years from the date the contract was breached. If you enter a contract with a professional, you have six years from the date the professional breached the contract before your claim is out of time.
  • Negligence: the primary limitation period is six years from the date you suffered a loss because of the negligent act or omission. There is also a secondary limitation period, which, in rough terms, runs for three years from the date that you became aware (or should have become aware) of the facts of your claim, subject to a long of 15 years from the date that the loss was suffered.
  • Fraud and deliberate concealment: six years from the date you discovered the fraudulent act or that something was deliberately hidden from you.
  • Breach of trust: six years from the date of the breach.
Can I protect a limitation period?

It is possible to protect a limitation period. If you issue proceedings (i.e., your claim to sue a professional in the Court) before the limitation period expires, it will be protected.

Once the claim is issued, you have four months to serve the Claim Form and Particulars of Claim on the professional. You can use this period to investigate your claim further and prepare the Particulars of Claim. If you need more time, you can try to agree on an extension of time for service or ask the Court to stay the proceedings.

However, be warned. The cost of issuing can be high, and you will likely incur extra legal costs in progressing the claim according to the Court’s timetable.

In addition, you will face a cost risk if you decide to discontinue the claim, if the Court has cause to criticise your conduct or, at worst, if your claim is unsuccessful.

Instead of issuing the claim, you can seek to enter a Standstill Agreement with your opponent before the limitation period expires. This contractual agreement states that you both agree to suspend the limitation period applicable to the claim for a certain period. The Standstill Agreement can be extended whenever necessary.

It may seem daunting to persuade your opponent to agree on a Standstill Agreement, but defendants are often open to doing so if they think there is a risk that you will issue proceedings. A Standstill Agreement allows both parties to avoid the costs and risks of issuing a claim and gives both time to resolve the claim themselves.

Bear in mind that a Standstill Agreement is unlikely to protect limitation periods that expired before the Agreement was signed. For example, if you seek to protect secondary limitation, but it is later established that you knew or should have known about the claim earlier, then there is a risk that the Standstill Agreement will not protect your claim.

What should I do if I realise a limitation period is expiring soon?

If you become aware that the applicable limitation period for your claim will expire soon, it is strongly recommended that you seek advice from a specialist professional negligence lawyer.

There are two main reasons for this:

Firstly, calculating limitation periods can be more complicated than it appears at first sight, particularly when it comes to establishing secondary limitation periods. Remember, the secondary limitation period may run from the point that you should have become aware of the facts of your claim, not necessarily when you became aware. You may need expert advice to be sure when the limitation period began running.

Secondly, when you instruct a professional negligence lawyer to protect limitation, you pass responsibility for monitoring the limitation date and taking steps to protect it to your lawyer. The burden of making sure the date is protected is off your shoulders.

If you think you may have a claim against a professional who has acted for you and would like advice from a specialist professional negligence solicitor, don’t hesitate to contact Alice Evelegh-Taylor at Tees at alice.evelegh-taylor@teeslaw.com to discuss your claim.  

Low-income trusts and estates

The Spring Budget 2023 laid out several changes to income taxation for low-income trusts and estates. Read on to learn how this may affect you.

Overview of changes

Low-income trusts and estates are those in which income is treated as exempt if it is below the low-income threshold.

The Spring Budget 2023 proposed several changes to the taxation of income for low-income trusts and estates. These changes were enacted by Finance Act (No.2) 2023 and came into effect from 6 April 2024 onwards. The changes impact trusts and estates and have knock-on effects on their beneficiaries.

The intention of these changes was to simplify tax reporting obligations for personal representatives and trustees of low-income trusts and estates going forward .

Impact of Changes to Low-Income Trusts

In the tax years leading up to and including the year ending 5 April 2024, trusts were treated as low-income trusts for a tax year if their savings income was less than £500. If the trust had any non-savings or dividend income, then it would not be a low-income trust.

Starting from 6 April 2024, a trust is treated as low-income in a tax year if its total net income is less than £500. This is an all-or-nothing treatment; therefore, if the net income is above £500, then all the net income is charged to income tax.

Starting from 6 April 2024, an estate is treated as low income for a tax year if the total net income in the year is less than £500. This is an all-or-nothing treatment; therefore, if the net income is above £500, then all of the net income is charged to income tax in that year.

A restriction to the £500 low-income threshold applies for trusts subject to the trust income tax rates, which are currently 45% for savings and non-savings income and 39.35% for dividend income.

The restriction is calculated by dividing the £500 threshold by the number of trusts created by the same settlor, which are:

  • subject to trust income tax rates, and
  • that still exist in the tax year, and
  • have any income in the tax year.

The maximum restriction is £100 per trust.

Trustees will need to assess each year if their trust is a low-income trust. If it is, they will not need to submit a tax return for that year, assuming there is no other reason to do so. There may be years where the trust does not qualify as a low-income trust, in which case the trustees would need to submit a tax return for the year.

Trusts subject to the trust income tax rates have tax pools to record income tax paid by the trustees. When payments are made to beneficiaries, 45% tax credits are attached, reducing the amount of the tax pool.

Trustees of low-income trusts will therefore need to pay tax on distributions of ‘low’ income to make up the tax credits being taken out of the tax pool.

In addition to the changes above, the basic rate and dividend ordinary rate of tax that applied to the first £1,000 of income for trusts subject to the trust income tax rates has been removed. These changes also came into effect from 6 April 2024 onwards.

Beneficiaries of low-income trusts

Beneficiaries of low-income trusts subject to the trust income tax rates will continue to benefit from the 45% income tax credits as they did before.

Beneficiaries of other low-income trusts, such as interest in possession trusts or settlor-interested trusts, will still be liable to income tax on their entitlements to income or receipts of income distributions. In these cases, if the trust is a low-income trust for a given year, the beneficiary will need to report the gross income, since no tax will have been paid by the trust.

Impact of Changes to Low-Income Estates

In the tax years leading up to and including the year ending 5 April 2024, estates were treated as low-income estates if savings income for the whole period of administration was less than £500, and there was no other type of income. If the estate had any non-savings or dividend income, then it would not be a low-income estate.

For estates in administration before and after the changes, the old rules will apply until 5 April 2024, and the new rules will apply starting from 6 April 2024.

Personal representatives of estates can informally report estate income to HMRC by letter instead of submitting tax returns in certain circumstances. In such circumstances, if the estate is a low income estate for a tax year, the personal representatives would not need to report the income for that year to HMRC.

Beneficiaries of low-income trusts

Previously, beneficiaries would need to report any gross income received from low-income estates where tax was not paid by the estate.

From 6 April 2024, estate income treated as exempt for a given year will now be exempt in the hands of beneficiaries when the income is distributed to them.

Commercial property market review April 2024

Latest research from Cluttons indicates that vacancy rates hit 4.1% at the end of 2023 – up from 3.8% in September.

This is partly due to e-commerce activity remaining strong and the demand for buildings to meet net zero standards. Vacancies are expected to keep increasing as supply continues to be released into the market.

Meanwhile, rental growth is easing across the UK; at the end of last year, the annual growth of asking rents in London was 3.5% – significantly less than the peak of 10% in Q2 of 2022. Experts hope this slowdown will cause the commercial property market in the capital to pick up. Industrial yields are more stable, rising above 4% in London and 6.9% in Manchester. Industrial equivalent yields have risen to 6.5% across the UK, which will likely bring in investors.

Retrofitting older buildings

With industry standards rising, investors and occupiers in the UK logistics market face pressure to retrofit older properties to keep up with the high quality of new builds. If older buildings are not improved, they risk being unusable in the coming years.

The report states that the ‘flight to quality of demand has, inevitably, started to weigh on the letting prospects of older, poorer-quality second-hand stock.’

With the government intent on decarbonising the economy, the focus on Energy Performance Certificates (EPC) and Minimum Energy Efficiency Standards (MEES) have risen to prominence across all sectors of the commercial property market.

By 2027, the minimum EPC rating for existing commercial properties will be C, a building rating below this will be considered unsaleable and unlettable. While a few years later, in 2033, standards are likely to tighten (currently under consultation), applying to any property with an EPC rating under B. The report summarises, ‘While landlords will be wary of the tightening standards, retrofitting provides an excellent opportunity to meet these standards and future-proof warehouse assets.’

Major London skyscraper now 95% let

The flagship London office scheme of AXA IM Alts – 22 Bishopsgate – is now 95% let. 

AXA IM Alts, on behalf of multiple investors, owns the state-of-the-art building near Liverpool Street. A global software company, UiPath, and a London-based service provider have both signed 10-year leases totalling 35,495 sq. ft.

Completed in 2020, 22 Bishopsgate has not appeared to suffer from the shift to flexible working, as AXA IM Alts say they are heading towards full occupancy. The investment managers reported that ‘leasing momentum at the building has remained robust’ – in the past year, around 112,000 sq. ft. of space has been leased, and there is strong interest in the 70,000 sq. ft. that remains vacant.

Hilton enters luxury lifestyle market

Hilton has made their first move into the luxury lifestyle market by acquiring a majority controlling interest in Sydell Group, owner of NoMad hotels.

Hilton reportedly aims to develop up to 100 NoMad hotels internationally, with 10 sites already in advanced discussion stages with Sydell. Hilton will lead the development of NoMad hotels, while Sydell will remain responsible for branding, design and management.

As part of the deal, Hilton will take control of the NoMad’s flagship hotel in London, situated in London’s Bow Street Magistrates Court building.

Chris Silcock, President of global Brands and Commercial Services for Hilton, commented, “By pairing an already proven brand concept that’s ready for expansion with the power of Hilton’s commercial engine, we are accelerating our ability to drive growth in the luxury lifestyle segment.”

This acquisition is part of Hilton’s plans to expand globally; earlier this year, the firm partnered with Small Luxury Hotels of the World (SLH), an association that inspects and verifies a curated collection of boutique accommodations. Hilton said they expect to increase their portfolio of luxury properties to 600-700 over the next few years.

All details are correct at the time of writing (17 April 2024)

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.