The rules, introduced yesterday as part of the finance bill, will introduce stricter tests on who can be deemed a partner in a company to stop firms labelling employees as partners to cut down on income taxes.
The legislation will also remove tax advantages available to companies who use mixed partnerships to pay salaries to workers at the corporation tax rates. Critics said the rules, trailed by chancellor George Osborne last week, would target junior partners at firms. “The new rules are tougher than expected and could make a big financial difference to junior partners,” PwC tax director Mark Saunders said.“We’re likely to see even junior partners trying to justify that they have significant influence on the partnership.”
To be deemed a partner, staff must have a quarter of their pay dependent on profits, contribute a quarter of their fixed pay to the firm’s capital and have “significant influence” over the partnership, the rules state.