Last month I reported on the plans by HMRC to remove self-employed status from fixed-share partners in limited liability partnerships or LLPs, a business structure frequently used by accountants and solicitors.
The issue has become very pressing for those affected since it now seems very likely that the rule changes will come into effect this April. That leaves very little time for organisations to conduct thorough overhauls of their business structures and, in many cases, to come to terms with renegotiating key terms with senior employees. Further, if self-employed status is to be maintained, fixed share members are facing up to the prospect of having to meet significant cash calls.
Accountants such as Baker Tilly have warned that the new rules “will be far harsher than originally expected”. Even those contemplating hasty changes may be caught out since tax specialists have advised that sudden injections of capital may be seen by HMRC as tax avoidance.
Details are emerging of the steps being taken. Law firm Weightmans has confirmed that its fixed share partners are not currently required to make capital contributions and thereby to share the risk of ownership. As a result they have commenced consultations with those effected which are due to conclude at the end of January.
Trowers and Hamlins is another firm that has commenced consultations. Their senior partner has confirmed that one option under consideration is to ask for increased capital contributions by way of a cash call.Details