Partnership Tax Changes will be introduced by HMRC

The plan is that changes will be made in order to deal with alleged tax avoidance by limited liability partnerships. The HM Revenue & Customs has verified that the measures should come in power on 6th of April 2014 even though there have been protests from the legal profession and the City.

This month a revised technical note and guidance on the so called “Salaried members rules” have appeared on the website of HMRC. These rules aim at preventing the misuse of LLP status by ‘disguised employees’.

The planned changes have immediately been criticized by the Law Society who claimed that those measures threat LLPs as simple tax avoidance schemes, without acknowledging their legitimate business commitments. HMRC has been warned that if this initiative is really implemented it may cost the UK revenue because it will encourage firms to move away from partnership structures and even out of the UK.

However, tax experts say that the revised rules seem to have taken into consideration some concerns that have been raised before. HMRC had eased its requirements for one of the tests of genuine partnership. In particular, this is the one of capital contribution to the business.

Even though some see the new rules as a small step in the right direction, firms have to act immediately in order to evaluate how these changes will affect them directly.

Some believe that to a certain extent, the rules have been clarified with given useful examples. Now it should be easier for true partner to keep their self-employed status.

Many firms have been waiting for the revised rules and now there is little time until the new regime gets in force, so it is better if they start the assessment of the affects as soon as possible.