LLPs warned on tax avoidance crackdown

Members of limited liability partnerships still face uncertainty – and the prospect of big, unexpected tax bills – under measures aimed at curbing tax avoidance, business tax advisers warned last week.

New rules aimed at curbing the abuse of partnership status by ‘disguised employees’ for tax reasons come into force on 6 April.

Revised guidance on the measures, published by HM Revenue & Customs late last month, was welcomed by the sector. They offer some relief on the three conditions a member must meet to claim partner status, covering profit share, influence in the business and capital invested.

Pamela Sayers, partner at accountants Smith & Williamson, said rules now recognise that a partner can have ‘significant influence’ without a formal management role. ‘This will definitely help smaller partnerships,’ she said.

However, she warned that the rules are ‘still lacking in clarity’ and could catch out partners operating remotely, for example in the London office of a US-based firm. She pointed out that legislation covering the changes will not be published until the summer.

Several firms have overhauled partnership structures ahead of the new rules’ implementation.

Credit: Law Gazette