Accountancy firms are seeking reassurance from the government that a crack down on the use of limited liability partnerships (LLP) will not affect genuine business structures. Concerns have also been raised that the proposals could slow down moves to create alternative business structures (ABS).
The government said it would consult on measures to remove the presumption of self-employment for LLP partners, which it said could disguise employment relationships. It also aimed to tackle the artificial allocation of profits to partners in LLPs and other partnerships to achieve a tax advantage.
Tax advisers, including KPMG and Ernst & Young, said they had contacted HMRC to get a better understanding of the proposals. Alex Henderson, senior tax partner at PwC, said: 'Anything that introduces uncertainty is unhelpful.'
Many accountancy firms, as well as other professional practices such as law firms, have in recent years switched to the LLP format in a move to limit individual partners' liabilities.
Sources suggest that the proposals could slow down moves to create ABSs, especially among law firms that could be looking for external investors. ABSs have been available since October 2011.
Patrick Stevens, tax partner at E&Y, said: 'Partnerships that have been set up [that are not made up of self-employed partners] will have to review their circumstances to see whether they could be affected.'
Deloitte anticipates that a 'substance test' could be used to determine whether an individual is a partner or an employee. Such a test could cover voting rights, capital contribution and exposure to losses.
The firm also understands that HMRC is investigating the use of corporate partners alongside individual partners, which could be designed to artificially manipulate differences between low corporation taxes and high income tax rates.
Stephen Herring, head of tax at BDO, said: 'In our view, while there may be particular sectors of business that have entered into this driven by aggressive tax avoidance motives, we consider such contrived tax avoidance schemes are not widespread.'
It is not only the accountancy profession that has issues with the proposed consultation. Law firms are also showing a keen interest. A Law Society spokesperson said: 'We do have concerns about the impact of these proposals and will be carefully scrutinising and responding to the consultation on behalf of the solicitors profession.'
