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dealing with the unexpected...

...accidents and business owners

Owners of a business who have an accident outside of work can come across difficulties in recovering their work-related losses.

There are a number of different ways of owning a business and this can affect the losses that can be recovered and the evidence that is needed to prove them. Generally, an injured person is only able to claim the loss of income they personally suffer and not the loss to the business or partners.

partnership

For a partnership, the partnership agreement, if there is one, will state how the profits are shared among the partners. Each case has to be looked at individually as there are many factors that will affect what can be recovered by way of loss of income and what evidence there might be to support such a claim. However, if a partner who has been involved in a serious accident remains entitled under the partnership agreement to a full share of profits while he or she recovers, then it may be difficult to show that he or she has suffered an individual loss.

limited company

Where an owner of a business has set up a limited company, the company is treated as a separate legal entity and any loss to the company is entirely separate to the loss to that individual person.

However, where a limited company loses income as a result of the absence of a key person, that loss of income may be reflected in reduced dividends to that individual, but again it may be difficult to show that the absence of one employee has caused a loss to the company and other shareholders may still be unable to recover their losses. The individual may also have a contract of employment with the company and may have an entitlement to sick pay in the normal way and so may have no loss of earnings.

general

Whatever the nature and ownership structure of the business, some elements of bringing a claim following a serious accident are common to all situations. The onus is always upon the person bringing the claim to prove the losses they have suffered. Accounts are vital to providing evidence and tax returns give an accurate statement of the level of earnings reported to HMRC. One common problem that we see when dealing with a loss of earnings following a personal injury claim is that when an accountant prepares accounts for a business, they may seek to minimise profits and the tax liability of the business. When calculating loss of earnings for a personal injury claim, it is not possible to ignore those figures.

Likewise, a short period of absence may not always show in the accounts. Seasonal variations also need to be considered. There may be occasions where a specific contract is lost due to absence. Then it would be necessary to obtain evidence of the contract and the income that was anticipated from it.

Julia Prior is an associate in Blake Lapthorn’s Personal Injury team in Southampton. Julia can be contacted on 023 8085 7316 or by email at: julia.prior@bllaw.co.uk.

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