National insurance contributions on limited liability partners would raise less than the widely quoted figure of £1.9 billion, according to the latest body to raise concerns about the chancellor's reported budget plan. In a statement today, the Association of Partnerships Practitioners, which represents partnership advisers, echoes calls by law societies for the chancellor of the exchequer to consult before introducing a new tax on LLP profits. 

Speculation about Rachel Reeves' plans for LLPs continues to mount more than two weeks ahead of the 26 November budget. The Financial Times reported last week that Reeves has ruled out imposing full employer contributions but is mulling introducing a partnership tax at a lower rate than the standard 15%. The Law Society and City of London Law Society last week urged the government to consult before making any change. 

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In its statement, the Association of Partnerships Practitioners said that the imposition of employer national insurance contributions on profits would encourage partners to convert to limited company structures, allowing the deferment of tax. It argued that partners are 'radically different from employees in terms of their status and responsibilities and receive few of the legal protections of an employee'. Rules dating from 2014 already ensure that LLP members deemed to be disguised employees are taxed as employees, it said.  

'Partnerships, including LLPs, are a cornerstone of the UK’s economic architecture,' the association argued. 'They underpin a wide range of sectors, from legal and accounting services to private equity, asset management, healthcare, farming and consultancy.' LLP structure 'offers flexibility, limited liability and a platform for entrepreneurial collaboration'.

'Any reform needs to be carefully considered because of the widespread detrimental effect it might have on those sectors and economic growth generally.'

The estimate that a 'partnership tax' would raise £1.9bn for the government in 2026-27 originated in a report by the Centre for the Analysis of Taxation in September. It said that 98% of the revenue from the reform would come from individuals in the top decile by total income.  

Meanwhile the Financial Times reported today that HM Revenue & Customs is set to launch its scheme to reward individuals who report tax fraud. Whistleblowers will receive up to 30% any taxes collected as a result of their action. 

 

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