Budget 2014: Advisers’ hopes dashed as LLP tax rules go through

FAINT HOPES that the government would push back implementation of controversial new tax rules for LLPs have been dashed, with the pressing ahead of changes set for April.

The rules have been tightened around LLPs, which have made it more onerous for partners to retain their status. A three-point check will be introduced from April, which, if partners fail to meet, will see them taxed as an employee.

The house of Lords Economic Affairs committee had recently called on the government to push back the rules’ introduction, but Budget documents released today outline that the changes will go ahead as planned.

Advisers have panned the rules as being a catch-all, having originally been outlined as an attempt to curtail avoidance where people were made partners without having any financial risk involved, yet benefitting from being treated as self-employed for tax purposes.

Kevin Hindley, a managing director at Alvarez & Marsal Taxand, warned that the “ill-thought through” rules would affect up to one in ten businesses.

“It is in contradiction to promises made by government at the time the LLP Act was introduced, and will create widespread uncertainty for many genuine partnerships,” he said.

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