The “vast majority” of Weightmans’ 126 fixed-share equity partners will increase their capital share in the firm, as the firm moves to meet new tax requirements for LLPs imposed by HM Revenue & Customs (HMRC).
Managing partner John Schorah told The Lawyer that almost all of the fixed-share partners had opted to put more capital in, following a consultation with partners into how the firm should meet the new HMRC rules (7 January 2014).
The new rules, set to come into force next month, will see LLPs landed with national insurance bills for LLP members who are regarded by HMRC as employees. One way of avoiding the tax is for fixed-share and salaried partners to contribute an amount equal to over 25 per cent of their remuneration to the firm as capital.
Schorah said on average, each Weightmans fixed-share partner would be contributing around £30,000 to the firm – totalling £3.8m. The exact amounts would vary according to a partners’ seniority. He added that one or two of the fixed-share partners had decided not to put any more capital into the firm and would be regarded as employees under the new rules.
The increased capital would be invested in the firm’s development, said Schorah.
“We don’t think ‘windfall’ is the right way of looking at this,” he said. Weightmans was planning to use the funds for an ongoing IT project, and also for some improvement to premises.
Fixed-share partners will also be gaining more voting rights in the firm as a result of the changes, including getting more say over major investments, although Schorah said the firm already treated equity and fixed-share partners alike in many respects.
“From a Weightmans perspective we’ve always tried to emphasise the fact that this is a very transparent partnership,” he said. “We want to make sure that the balance is kept.”
Schorah said all partners were already provided with the same financial information, for example.
He said the firm was hoping to have collected in the capital increase by 5 April, “so it’s done and dusted and we can move on”.
The legislation takes effect from 6 April. Calls from organisations including the House of Lords to delay the implementation by a year, to allow businesses more time to meet the new requirements, appear to have fallen on deaf Government ears with the measures being included in this week’s Budget.
Fladgate has already raised £1m in a capital call from partners (27 February 2014) while other firms to be considering the move include Hill Dickinson (19 February 2014), Nabarro (26 February 2014) and TLT (10 February 2014).