New partnership tax rules could squeeze profits
Accountancy firms will need to review their partnership structures to prepare for new rules designed to stop employees in limited liability partnerships pretending that they are self employed to avoid tax.
Junior partners are most vulnerable to having their self-employment status removed, which could increase costs and reduce profits for partnerships.
Draft legislation in the 2014 Finance Bill, published earlier on Tuesday, will remove the automatic presumption of self-employment for partners in limited liability partnerships (LLPs).
The measure to prevent “disguised employment” was first aired in the 2012 Budget and received a negative response from tax advisers during consultation this year. But that had little effect on the final legislation, which HMRC predicts will raise just over £3bn in tax by 2018-19. Some tax experts were surprised that the detailed legislation was tougher than expected.
The new rules will...