Debevoise & Plimpton

Proposed changes to the taxation of UK partnerships

In May 2013, HM Revenue & Customs (HMRC) published a consultation document looking at various aspects of partnership taxation. As a result of this consultation process, the UK government announced two main anti-avoidance provisions in its Autumn Statement last month. The first deals with the taxation of salaried LLP members and the second with the allocation of profits in partnerships with a mix of individual and non-individual members. On 10 December 2013, the UK government published draft legislation, together with a technical guidance note drafted by HMRC setting out the government’s opening gambit and HMRC’s interpretation of the legislation.

Currently, a UK member of an LLP is taxed on profits and gains arising in the LLP in the same way as a partner in a traditional partnership. Since LLPs are principally used for operating rather than investment activities, the main benefit derived from an LLP structure compared with a classic corporate structure is that a member’s profit share is not subject to national insurance in the same way as a salary would be. This particularly benefits the LLP since it does not pay employers’ national insurance contribution.

The point is an issue in respect of LLPs but not traditional partnerships because members of LLPs, unlike partners in commercial partnerships, are all treated as self-employed for tax purposes, whether or not their rights and obligations resemble those of partners in a conventional partnership. HMRC comments in its draft guidance that ‘many LLPs have members engaged on terms more closely resembling those of employees, who work for the business, than of traditional partners, who carry on the business’…

If you are registered and logged in to the site, click on the link below to read the rest of the Debevoise & Plimpton briefing. If not, please register or sign in with your details below.

Sign in or Register to continue reading this article

Sign in


It's quick, easy and free!

It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.

Register now

Why register to The Lawyer


Industry insight

In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.


Market intelligence

Identify the major players and business opportunities within a particular region through our series of free, special reports.


Email newsletters

Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.

More relevant to you

To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.

Briefings from Debevoise & Plimpton

View more briefings from Debevoise & Plimpton

Analysis from The Lawyer

  • Shell

    Shell: taking the power back

    Shell legal director Peter Rees is switching litigation control away from external counsel to a unified global team of in-housers

Browse This Firm’s


Old Broad St