UK HM Revenue and Customs Propose Significant Clampdown in Consultation on the Taxation of UK LLPs and Partnerships
Summary: On May 20, 2013, HM Revenue and Customs (HMRC), the UK revenue authority, published a consultation document focusing on two aspects of the taxation of partnerships, and, in particular, UK limited liability partnerships (LLPs): disguised employment and profit and loss allocation schemes.
It is expected that a large number of professional (legal and accounting) and financial services firms established as LLPs, which, in many ways, are similar to US LLCs, will need to review their set-ups. Equally, the proposals will be of significant concern to the UK investment management industry, and in particular the private equity and hedge fund sectors, where most businesses are set up as LLPs.
Under the consultation, comments are invited by August 9, 2013. However, the feedback sought is in many instances limited to the design of the proposed changes to the current tax rules; there are clear statements from HMRC that the anti-avoidance measures will be introduced to counter perceived unfairness in the UK tax system. The changes, once final, are to come into force with effect from April 6, 2014.