City of London Law Society voices tax change concerns

The City of London Law Society (CLLS) has voiced significant concerns regarding reports that the Treasury is contemplating changes to National Insurance Contributions (NICs) for partners in limited liability partnerships (LLPs). In a letter addressed to the Chancellor of the Exchequer, the CLLS articulated that while the legal profession acknowledges the necessity of a fair and effective tax system, the proposed changes could pose unintended consequences for one of the UK's most competitive and economically vital sectors.

Colin Passmore, Chair of the City of London Law Society, expressed that the organisation “fully understands and supports the Government’s objective of ensuring that everyone pays their fair share of tax." However, he cautioned that “these particular proposals appear to have been developed without sufficient consultation or clarity as to their scope and risk undermining one of the UK’s most successful exports: English law." He further emphasised their readiness to work collaboratively with HM Treasury to address any perceived imbalances, urging a period of reflection and engagement before the implementation of such measures.

The CLLS's letter highlights several concerns, including the potential economic and competitive repercussions of introducing a new NIC charge. It points out the risk of inconsistent treatment among various business structures and challenges misconceptions about the LLP model, clarifying that it does not confer any tax break as some reports have incorrectly claimed. The Society also stressed the broader implications of these changes for the City of London, especially as the Ministry of Justice aims to promote English law through its newly formed English Law Promotion Panel, and how it could impact the Government’s growth agenda.

Mr Passmore further noted that “the UK’s legal services sector contributes more than £57 billion in gross value added, supports over half a million jobs, and generates substantial tax receipts." He described the sector as a high-growth, high-value industry that supports the UK's standing in upholding the rule of law and expressed a desire to engage directly with the Chancellor and her team on this matter.

Concluding its message, the CLLS underlined that the partnership model has been a cornerstone of professional services for centuries, enhancing accountability, client trust, and long-term stewardship. The Society warned that altering the fiscal treatment of LLPs without adequate consultation could disrupt established business structures, deter international investment, and diminish London’s appeal as a hub for global legal and advisory firms.

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