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Experts critical of partnership proposals

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The City of London Law Society Revenue Law Committee and the ICAEW Tax Faculty have both called for a delay in the implementation of the proposed ‘salaried member’ partnership measures which are due to be included in Finance Bill 2014.

The Revenue Law Committee said the measures should be deferred until April 2015, with its chair, Bradley Phillips, describing the provisions as ‘poorly drafted, leading to unsatisfactory (over-)reliance on (entirely non-binding) HMRC guidance’. Phillips said the guidance in the accompanying technical note is ‘confused in a number of different areas’ and ‘needs to be dramatically improved’.

‘Given the time and effort spent engaging with HMRC during the consultation process, it is particularly disappointing to find ourselves in this position at this time (less than four months before the majority of the new rules are intended to take effect),’ Phillips said. ‘This calls into question whether it is worthwhile devoting such time and effort to future consultations.’

The ICAEW Tax Faculty also expressed concern about the transition to the new salaried member rules, noting that by the time the measures are finalised when FA 2014 is enacted in the summer, ‘businesses will have already been affected for 15 months or more’. The revised proposals are still ‘too complex for practical implementation’ and ‘disproportionate to the problems they are attempting to resolve’, it said.

These representations follow complaints from the Law Society that the new rules would create an inconsistency between UK and foreign LLPs, putting UK LLPs at a competitive disadvantage.

George Bull, senior tax partner at Baker Tilly, writing in this week's Tax Journal, also voiced concerns over the proposals: ‘It was disappointing (if understandable) that HM Treasury should mount a smash-and-grab raid on the professions to increase the tax yield’, Bull wrote. To change longstanding established practice ‘in four months is to risk the enactment of unworkable legislation which requires subsequent changes ... if there has to be change, let’s get it right from day one.’

Meanwhile, the House of Lords Economic Affairs Finance Bill Sub-Committee continues to examine the provisions, this week hearing evidence from senior HMRC and HM Treasury officials. In an article in last week’s Tax Journal, Lord MacGregor, chairman of the sub-committee, explained that the topic was chosen for review ‘because it has not had much attention in recent years and the measures ... had not been thoroughly consulted on before publication of the draft Bill.’