Corporate affairs minister Kim Howells said there could be action in next year’s Finance Bill but promised nothing would be done to worsen the regime for professional partnerships that switch to the new structure.
Howells warned of the tax avoidance crackdown as MPs debating the LLP legislation heard an attack from left-winger Austin Mitchell MP at the failure to include more stringent audit user safeguards as a quid pro quo.
He complained the ‘shabby if not sordid’ Bill was being introduced at the behest of the Big Five from a desire to protect their profits.
He said: ‘Stakeholders in companies have few rights to protect them from negligent auditors, but we are rushing to strengthen the position of those auditors.’ Howells said LLP status would be available to existing limited companies and new start-ups, but there would be no easy way for plcs to become LLPs.
He said they would be taxed as partnerships, but added: ‘We are aware the tax treatment may allow scope for LLPs to be used when the primary or only attraction of LLP status is tax treatment. Clearly that is not intended.’
He added: ‘We shall consider that issue carefully with the Inland Revenue and, depending on our conclusions, measures may be introduced in the 2001 Finance Bill.
‘The Revenue will consult widely on its intentions. It is important to emphasise we do not intend to undermine the commercial certainty of LLP tax treatment for those businesses for which the status was intended.’
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