Eversheds has become the latest to issue a cash call to its 164 fixed-share partners following HMRC’s crackdown on partnership tax.
Following a consultation the firm has asked its fixed-share partners to contribute 25 per cent of their profit share to the firm in a bid to avoid paying national insurance for them (26 February 2014).
The firm has also become one of the few to debate raising voting rights in line with the fresh contributions and has launched an on-going consultation to debate the issue.
The decision follows the revenue’s deadline of 6 April when firms had to have cemented their new arrangements. HMRC handed down revised guidelines in February giving the green light to partner cash calls but allowing a three-month grace period of fixed-share partners to come up with the additional cash.
In order to avoid being classed as ‘employees’, placing a national insurance burden for each on the firm, each has to fail one of three tests aimed at determining partners’ level of influence within the firm.
Most have opted for injecting over 25 per cent of their ‘disguised salary’ as capital into the firm, though not all have boosted voting rights in line with that (18 February 2014).
Nabarro was one of those. Its likely injection of £1m into the firm from 35 per cent of its partnership resulted in higher voting rights for all fixed-share partners.
Eversheds’ CEO Brian Hughes said: “Following a series of discussions our fixed share partners will be making capital contributions equivalent to 25 per cent of their profit share.
“During the course of these discussions, associated issues such as voting rights, were raised. We obviously had to act quickly to ensure that the capital payments were in place in line with the timescales set down by HMRC.”
He added: “We have however agreed with our FSP group that we will engage with them in an extended consultation to discuss these associated concerns in more detail.”
Hogan Lovells became the most recent firm to jump on board the cash-call train earlier this month when it announced plans to ask its 65 partners to inject between £60,000 and £100,000 in response to HMRC plans (3 April 2014).
Last month Weightmans and Addleshaws both issued cash calls last month. Addleshaw Goddard partners voted in favour of changing the partnership agreement on 20 March (24 March 2014). The firm asked 60 FSPs to make a cash injection of just over 25 per cent of their salary. Weightmans FSPs also voted for a £3.8m cash call to meet HMRC’s demands (24 March 2014).