Lords call for partnership tax rule delay

The government should consider delaying new tax rules for limited liability partnerships, due to start in April, to allow more time to improve the legislation, a House of Lords committee has recommended.

New rules to stop partners pretending that they are self-employed to avoid tax are so different from the original proposals consulted on last summer that more time is needed to get it right, the peers said in a report.

Under new rules, partners would need to pass at least one of three tax tests to carry on being taxed as self-employed:

  • 80% or more of their pay is guaranteed
  • The partner does not have “significant influence” over the affairs of the partnership
  • The partner pays less than 25% of their “fixed pay” to the partnership profit pool

The rules will mainly affect junior partners because they usually have most of...

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Comments

Tests are the wrong way round

darren.austin | | Permalink

I think the tests are the wrong way round. For example, presumably less than 80% of pay should be guaranteed to be self employed. Also, I believe the member needs a capital account equivalent to at least 25% of their fixed salary rather than pays 25% of their fixed salary which would indicate an annually increasing amount.