TLT is expected to be amongst the first group of firms to issue a cash call to fixed-share partners (FSP) in response to HM Revenue & Customs’ (HMRC) changes to partnership taxation.
In a move that is expected to become indicative of a growing trend across the profession, the firm has requested that each FSP, of which there are 60, contribute £20,000 to the cash pot. In total the firm will boost its coffers by a minimum of £1.2m.
The move will see FSPs invest a percentage of their annual income depending on which salary band they are in.
TLT remunerates its FSPs via around 20 salary bands, which are thought to range between £97,500 and £232,500. Insiders estimate an average FSP salary to be around £110,000.
The amount due from partners will differ according to remuneration packages, but on average FSPs will be expected to contribute around 25 per cent of their annual salary.
Previously fixed-share partners have not been expected to put any cash into the business and do not have voting rights within the firm.
Partners were invited to respond to the proposals and it is expected that meetings will be scheduled over the coming weeks but a deadline for collection of the funds by the end of the financial year has already been set.
A number of firms are expected to follow suit after HMRC last year vowed to close a loophole that allowed fixed-share partners to be classified as self-employed, resulting in the firm escaping paying national insurance contributions for these individuals.
TLT managing partner David Pester said: “Like all law firms, we need to make sure we are compliant with HMRCs draft changes to the tax status of fixed share partners before April.
“Based on guidance from Deloitte, we launched a consultation with our fixed-share partners in January. That consultation is ongoing and no final decision has been made, not least because we are still waiting for final guidance from HMRC.
“However, we are currently discussing a mix of a capital contribution and additional profit share. In addition, we will put in place external funding for FSPs if needed, to support any capital contribution.”
HMRC published its proposals for changes to the partnership tax regime in December (17 December 2013).