The Law Society of England and Wales is extremely concerned that the UK government may extend the equivalent of employer national insurance contributions (NICs) to limited liability partnerships (LLPs), as chancellor Rachel Reeves has today refused to rule out such tax rises ahead of the autumn budget on 26 November.
Law Society vice president, Brett Dixon, said: “We are concerned the government is pushing ahead with tax rises in this year’s budget.
“A balanced approach to tax equalisation based on consultation and robust economic data is needed in the upcoming budget. The chancellor must rule out a tax hike against LLPs, which could harm one of the UK’s most globally competitive sectors and undermine the growth agenda the government is working to deliver.
“The legal sector is already contending with major regulatory changes in anti-money laundering and compliance, as well as significant pressure from HMRC’s evolving approach to tax adviser regulation. Adding further burdens now risks creating a perfect storm that limits firms’ ability to invest, hire, and contribute to growth, which could prove damaging to the wider economy.
“There will also likely be an impact on legal aid firms, a significant portion of which are structured as LLPs. Often operating with tight margins, this could be a heavy blow to those firms and have a real impact on the availability of legal aid across the country, putting further pressure on public services.”
Legal services are vital to the UK’s economic success, but the government’s commitment to legal services as a driver of economic growth in its industrial strategy would be undermined if it chooses this path.
The legal sector is a global powerhouse that connects every part of the economy from the high street, regions and to the City. It is worth almost £60 billion, employing more than half a million people and exporting more than £9 billion in services.*
Poorly designed tax burdens could stifle investment, recruitment, and innovation which would ultimately reduce jobs, secure livelihoods and access to justice when we need it.
US law firms could also be given an unfair advantage over UK LLPs as a result of the change in tax rules.
The Law Society has raised concerns with HM Treasury, Department for Business and Trade and the Ministry of Justice.
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