Reeves is considering imposing a charge on people who use LLPs, as part of a tax raid on lawyers, accountants, locum doctors, doctors in private practice and other professionals such as consultants, The Times and other outlets reported this week. Current speculation suggests it would be set at less than the 15% rate of national insurance, could raise about £2bn per year and would affect LLPs only, not partnerships as a whole.
An LLP partner’s liability is limited to their investment and they are treated as self-employed for tax purposes so do not pay the 15% rate for employer national insurance contributions.
However, nobody will know for certain whether Reeves is kite-flying to test the idea or serious until budget day on 26 November.
David McNeill, the Law Society’s director of public affairs, said the alleged plan ‘makes no logical sense as a joined-up growth strategy.
‘Imposing a new tax on LLPs could be a big hit on the legal profession, a sector which the government is depending on as part of its growth strategy. Law partnerships don’t get the same tax breaks for investment as other businesses but are now having to pay the same levels of tax. On top of that, law firms are facing the risk of new regulation costs and bureaucracy’.
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