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Budget tax threat to LLPs

The government need not take drastic measures to address the mischief of disguised employment relationships, argues David Ludlow

28 March 2013

The Chancellor's Budget announcement that the anticipated review of partnership tax rules will focus on the 'misuse' of Limited Liability Partnerships (LLPs) to disguise employment relationships, has caused some alarm in the legal and accountancy professions. Under the Limited Liability Partnership Act 2000, members of an LLP are regarded as self-employed and are not charged employer's National Insurance Contributions on their profit shares.

The Budget document claims that "mis-use" of partnership rules has been a feature of many tax avoidance schemes closed down in recent years. The chancellor's objective is to prevent the artificial allocation of profits to employees treated or labelled as partners to achieve a tax advantage.

It is not clear what measures the government proposes to take. One possibility must be the repeal or amendment of section 10. While the LLP bill was going through parliament in 2000, Lord McIntosh noted a desire, ...

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