THE IMPOSITION of drastic rule changes for the way limited liability partnerships are taxed has got firms up and down the UK in quite a bind. Not least because it appears certain to force firms to reassess the way in which their partnerships are structured, the way their people are remunerated and who from their ranks are caught.
Not only that, but once it’s all been established, they then have to act on it – make those deemed salaried partner either full partner or an employee, and all the administration that goes with it – by 6 April.
For many partnerships, the preferred route to circumvent the problem is to ask salaried partners to place more capital in the business, although worries persist that may be harder to implement for the largest practices.
It’s no surprise, then, that firms are, to put it lightly, peeved.
And so, guidance from HM Revenue and Customs released last week (beginning 17 February), has at least been helpful, but it’s done little to sooth the deep-lying concerns held by practitioners.
As the vast majority of accountants and lawyers point out, they’ve no issue with addressing the underlying issue with LLPs; that of the abuse of the structure for tax reasons, but there appears to have been a failure to acknowledge it has tended to occur in other sectors, such as agriculture.
The 28 examples of permutations for what constitutes a partner are indeed helpful, practitioners say, but with five weeks to take them into account, apply them and act on them, it is too little, too late.
More than that, there is a growing realisation that such a review is going to have to be an annual one, albeit not stuffed unceremoniously into a five-week window.
Nonetheless, partners’ remuneration fluctuates over time, and there is a strong suggestion it would be an imprudent firm that fails to review its partners’ status in the light of this legislation.
There has been hefty criticism, too, for the undemocratic nature of the consultation process, which unlike, say, real-time PAYE with all its easements and allowances, has been incredibly prescriptive with seemingly little heed paid to critics of the proposals.
The only option left to address remaining issues, some suggest, is to bolt on tweaks once the legislation is passed – a wholly unsatisfactory resolution for those pursuing tax simplification.
But, we are where we are, and it seems the only relaxation to be made by the authorities is that providing by 6 April 2014 there is an unconditional requirement for partners to contribute capital funding and that capital funding is actually in place within three months of 6 April 2014, then this will count. Similarly, there is relaxation time-wise for new partners who join after 6 April 2014; they will have two months to introduce capital, although that is cold comfort for a significant number of firms.
A financial controller who defrauded his company by nearly £25,000 has been jailed for 18 months
HMRC has outlined a change in VAT policy to the treatment of dwellings that have been formed from either the construction of new buildings, or from the conversion of non-residential buildings
The Middle East arm of Deloitte and Touche is being sued by a Dubai-based investment group after it failed to spot money laundering at a now defunct Lebanese bank
Let us hope that valuable asset protection vehicles are not made prohibitively burdensome or abolished in the desire to “simplify” IHT