Clampdown looming for LLPs that artifically seek tax cuts

Marion Dakers
FIRMS that use the limited liability partnership (LLP) structure to avoid tax are facing a crackdown under plans set out in yesterday’s Budget.

The government is consulting on measures to remove the presumption of self-employment for partners in LLPs and clamp down on LLPs and other partnerships that artificially allocate profits and losses to members to minimise their tax bills.

The LLP structure, which is used legitimately by thousands of companies from small outfits to Big Four accountancy groups and City law firms, has featured in “many avoidance schemes closed down in recent years”, the Treasury said in its tax legislation plans published yesterday. HMRC won a Supreme Court case in 2011 to close a £1.5bn LLP tax avoidance scheme named Tower MCashback.

The government will set out plans to change the rules later this year with a view to including the overhaul in the Finance Bill 2014.

Accountancy firm Smith & Williamson said in a blog post that the consultation, which was trailed in the 2012 Autumn Statement, means that “all professional firms will need to review their structures and internal arrangements”.