Some news, views and comments about everything and anything, relevant and irreverent.
Cash could be flowing out of your partnership if you haven’t planned ahead for some changes in the way you’re assessed. Some words of caution from your partners in kind, Springfords.
That nasty man George Osborne has been at it again. No, not biting the heads off bats (that’s the other branch of the family), he’s about to take a bite out of most of the professional services companies in the UK. We know this issue has come up before, but that doesn’t make it any less relevant. In fact, it’s as topical as it gets.
Lots of businesses, Springfords included, are organised as Limited Liability Partnerships, or LLPs. At the Budget back in the Spring, George decided to make a change to the way some members in those partnerships are treated for tax purposes as some LLP’s (not us!) had been promoting employees to member status to avoid paying employers national insurance on salaries and benefits in kind (such as company cars).
In principle, from now on, there’s a likelihood that some members in some partnerships may be considered as employees in the firm. It’s all in an article we have written in a recent e-newsletter – click here for more detail.
What are the consequences for LLPs - possibly like yours - if you happened to miss that little nugget from the battered red briefcase? Quite a lot actually, say our tax team.
Some commentators have said that legal and other professional services firms may need to raise extra capital because of the rules to reclassify certain members of LLPs as employees for tax purposes. Firms affected may even need to raise capital sums to offset the potential tax demands. (“Capital sums” is accountancy speak for 'lots of money'.)
Our friends in the legal professions are the most likely to be affected, but the cast of Law and Order UK are hardly the only ones caught up this taxation trawl. The rules, responsibilities, obligations and exceptions are quite complicated. They’re almost as complicated as the guidance notes issued by HMRC.
We’ve been getting a headache getting our heads around the issue, but, thankfully, we’ve been able to claim paracetamol as a valid business expense on this one. If the very mention of individual members, capital stakes, unconditional requirements and overdrawn current accounts leave your eyes swivelling in opposite directions … we wouldn’t blame you. Before you go reaching for the medicine cabinet though, give us a call. These are issues we know lots about and we can probably avert your migraine.
Don’t worry, for tax purposes, working together on the issue of LLP liability doesn’t count as a partnership.