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HM Revenue and Customs Propose Significant Clampdown in Consultation on the Taxation of LLPs…

June 11, 2013

HM Revenue and Customs Propose Significant Clampdown in Consultation on the Taxation of LLPs and Partnerships

Summary: On 20 May 2013, HM Revenue and Customs (HMRC) published a consultation document focusing on two aspects of the taxation of partnerships, and, in particular, limited liability partnerships (LLPs): disguised employment and profit and loss allocation schemes.

Under the consultation, comments are invited by 9 August 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 6 April 2014.

It is expected that a large number of professional (legal and accounting) and financial services firms established as LLPs will need to review their set-ups. Equally, the proposals will be of significant concern to the investment management industry, and in particular the private equity and hedge fund sectors, where most businesses are set up as LLPs.

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Download: UK Investment Funds and Tax Alert (pdf 100899 bytes)