Possible tax hikes for LLPs in Budget may ‘distort’ the market and push firms overseas

Despite the professional services sector dodging tax hikes on LLPs in last year’s Budget, it remains unclear whether Chancellor John Healey will impose tax changes this time round, but Rosie Harris-Davison writes that experts have warned against any tax burdens on the sector.

Colin Passmore, Chairman of the City of London Law Society (CLLS), echoed the same concerns ahead of this year’s Budget.

“Any return of last year’s proposals to extend national insurance to LLP partners would be both unfair and damaging to growth. LLPs are taxed in the same way as other partnerships, so there is no loophole to close,” Passmore told City AM.

Passmore said any changes would “create new distortions rather than correct an existing one.”

“Those distortions would push firms to restructure how they pay and organise their partners, or to move work to competing centres such as New York, Singapore and the Gulf,” Passmore said.

“That would undermine one of the UK’s most successful exports at precisely the moment the government is looking to the private sector for growth. We fully support a fair tax system, which is why a change of this significance should only follow proper consultation with the profession,” he added.