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This year, The Lawyer’s annual ranking of the largest UK law firms by turnover is available as an interactive, digital benchmarking tool. For the first time this will allow you to manipulate each data set against the metrics of your choice.
Some firms could be facing cash windfalls of up to £9.5m in light of HM Revenue & Customs’ (HMRC) new legislation on the way salaried partners are taxed.
Under the new regime salaried partners will not be considered self-employed for tax purposes unless they can prove that status by failing one of three tests.
If firms fail the tests their salaried partners will be considered employees and they will have to start paying employers’ national insurance contributions (NIC) for these individuals, adding thousands of pounds to their salary bill (17 December 2013).
However, some commentators have mooted the prospect of substantial cash windfalls if firms request capital injections from salaried partners in order for them to qualify as self-employed.
Based on the latest UK200 figures, The Lawyer calculated the potential value of such a windfall at a selection of firms and found that Eversheds, assuming it requested a 25 per cent equity injection from salaried partners, could raise £9.5m in additional cash. If the same was done at Berwin Leighton Paisner, it would raise £9.2m, DWF could add £4.7m to the coffers and Shoosmiths would increase capital investment by £2.2m.
However, commentators are divided on the relative benefit of the extra funds. Menzies head of professional services Peter Noyce said: “It’s possible that the windfall will simply result in other partners’ current accounts being repaid quicker, but this would only be a short-sighted personal benefit. Firms are better off seizing the opportunity and investing capital in long-term projects and efficiencies.”
While Crowe Clark Whitehill tax partner Louis Baker said: “It could be helpful from a working capital finance point of view, but a firm would need to ask if it needs it. And the banks would not want to increase their exposure, so if they lent a few million to finance partners’ capital contributions they’d reduce the firm’s overdraft at the same time.”
Under the draft legislation, a member of a limited liability partnership (LLP) will be treated as an employee for tax purposes if all the following conditions are met:
If an individual performs services for the LLP and the amounts payable by the LLP in respect of the individual’s performance of those services will be wholly, or substantially wholly, fixed, or if variable, variable without reference to, or in practice unaffected by, the overall profits or losses of the LLP (‘disguised salary’).
The mutual rights and duties of the members and the LLP and its members do not give the individual significant influence over the affairs of the LLP.
The individual’s contribution to the LLP is less than 25 per cent of the disguised salary