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Tax Law has changed and this affects professional practices. Pamela Sayers from Smith & Williamson discusses some of these changes in this TV show:
I think this year we’ve seen some huge changes in the taxation of professional practices, and perhaps the first greatest change for perhaps sixteen years, primarily as a result of the issue of a partnership consultation document in May this year, and we expect to receive a final version of that around about the time of the autumn statement, which is on 4th December (2013).
There is an attack on service companies where many of our professional practices clients have a service company running alongside, and also the government have asked the office of tax to review ways of simplifying taxation of partnerships, so a lot of changes.
They’re looking to really tackle avoidance of tax, so it comes under the whole ambit of the new guard, the general anti-abuse rule that was effective from July 2013. So in the context of partnerships where there has perhaps been some perceived abuse following the Limited Liability Partnership Act in 2000, so they are looking at ways of preventing sort of the avoidance of tax within those firms.
And one of the main ones being that if you are a member of an LLP it can no longer just be assumed that you are self-employed for tax purposes. And depending on the outcome of the partnership consultation document, this could lead to significantly more revenue for HMRC by the collection of employers’ NI at 13.8%.
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Profitability can be the foremost consideration for partners and firms. In this TV show Pamela Sayers discusses why they also need to be aware of tax changes.
I think what partners and partnerships are saying, that we, the firms are slowly coming out of the recession, beginning to see perhaps a turnover and profits recovering to where they were perhaps four years ago, and now with this sort of attack on the taxation of partnerships this could add to increase costs and therefore still reduced profitability within the firms.
There has to be a general awareness by partners. Even though they might not be involved in the management and the running of the firm, they should have an awareness that there is an attack by HMRC on their own firm, which could affect their drawings, their allocation of profits, coupled with the increased sort of penalty and interest regime from HMRC; therefore, they need to be absolutely up to date with their own personal tax affairs as well to ensure there is no late filing of their returns.
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