Autumn Budget: Professional services sector dodged ‘damaging’ tax hikes
The professional services sector breathed a sigh of relief after dodging tax hikes on LLPs in Rachel Reeves’s Autumn Budget.
It was rumoured that Reeves was looking to add a layer of tax on limited liability partnerships (LLPs), a move that sparked a flurry of anger from the broader professional services industry, including the legal sector.
The LLP model, used by professional services such as law firms, accountancy, and some doctors (GPs), came into force 25 years ago, which does not pay corporate tax on its profits.
Many professional bodies across all corners of the sector warned against the move, given that professional services partnerships are the cornerstone of the UK economy.
The total tax contribution of the financial and related professional services industry was £110.2bn in 2023, while employment taxes for the financial and related professional services industry alone totalled £55.1bn.
The FT reported earlier this month that Reeves was reconsidering a levy on LLPs, in addition to backing away from income tax hikes and the controversial ‘exit tax’ policy.
Sector lobbying paid off
At the time, the Law Society demanded ‘absolute clarity’ that the plan was in fact off the table, and today, following the conclusion of the Reeves Budget, the sector’s lobbying of the Treasury paid off.
Speaking in a statement, Law Society president Mark Evans, said: “Law Society has been lobbying the government on behalf of our members to ensure that firms using LLPs will not face a new tax in today’s Budget.
“Leaders from across the professional services sector came together this month to write to the Chancellor to warn against such a measure and how damaging it would be for the UK economy.”
Olly Cheng, senior financial planning director at Rathbones, added: While a tax on LLPs “might have raised additional revenue, it would have added to the burden on a group that we know already contributes significantly to the Treasury from our experiences working with clients in partnerships”.
“The LLP structure exists for legal protection – not to avoid national insurance,” Cheng added.