The introduction of changes to the taxation of limited liability partnerships will go ahead on 6 April 2014 despite calls for a 12 months’ delay to enable firms affected an opportunity to adjust.
Under the draft proposals, partners have to satisfy one of three tests in order to maintain their status:
- Ensure at least a quarter of pay is profit-dependent
- Contribute at least 25% of ‘fixed pay’ to the firm’s capital.
- Prove they have significant influence on the overall partnership.
If partners are deemed to be employees, then employer’s national insurance contributions at 13.8% will be due and other employment-related tax rules, such as benefits in kind and share scheme rules apply.
In view of these changes there will be many partners from across the professions who will suddenly be considered employees.
Any delay, the Treasury said would be “unfair for the vast majority of LLPs which are now preparing to implement these changes from April this year”, and would “undermine the government’s commitment to a fair system and to tackling tax avoidance”.
If you have any concerns with regard to this topic and would like further assistance and advice please call Sue Stephens.
