HM Revenue and Customs Propose Significant Clampdown in Consultation on the Taxation of LLPs and Partnerships
Summary: On 20 May 2013, HM Revenue and Customs (HMRC) published a consultation document focusing on two aspects of the taxation of partnerships, and, in particular, limited liability partnerships (LLPs): disguised employment and profit and loss allocation schemes.
Under the consultation, comments are invited by 9 August 2013. However, the feedback sought is in many instances limited to the design of the proposed changes to the current tax rules; there are clear statements from HMRC that the anti-avoidance measures will be introduced to counter perceived unfairness in the UK tax system. The changes, once final, are to come into force with effect from 6 April 2014.
It is expected that a large number of professional (legal and accounting) and financial services firms established as LLPs will need to review their set-ups. Equally, the proposals will be of significant concern to the investment management industry, and in particular the private equity and hedge fund sectors, where most businesses are set up as LLPs.