The Law Society is concerned that if the present changes to LLP taxation are enshrined in the forthcoming Finance Act 2014, decisions will have to be made for tax, rather than commercial reasons.
For example members may be required to introduce capital purely to comply with changes in tax law. There are also fears that the tax changes will make UK based LLPs less competitive than overseas LLP partnership structures.
There is an argument that HMRC are demonising the loss of National Insurance revenues that result from the reclassification of salaried employees as LLP members, and ignoring the real benefits that LLP structures offer the development and prosperity of our financial services and legal sectors. After all it is this sector that is presently “buoying up” our economic growth.
It will be interesting to see if the representations made by the Law Society and other affected groups will impact HMRC’s guidance on LLP tax changes that are due to be published on 17 February 2014.