UK accountancy firms lobby against anticipated tax changes

UK accountancy firms have started lobbying against the anticipated tax reforms that could impact partnership structures, reports Financial Times.

Chancellor Rachel Reeves is reportedly expected to announce these changes in the next month's Budget, which has triggered a wave of concern across various professional sectors.

The Chancellor is said to be planning to incorporate national insurance into the tax obligations for certain UK professionals.

The Centre for the Analysis of Taxation (CenTax) estimates that around 200,000 individuals could be affected, potentially generating £1.9bn ($2.5bn) a year for the government.

In the UK, several large law and accountancy firms choose to function as limited liability partnerships (LLPs).

This business structure offers them the benefit of favourable tax treatment, even as they make substantial profit margins.

According to Dan Neidle from Tax Policy Associates, eliminating the exemption for national insurance contributions for these LLPs would raise the marginal tax rate for partners from approximately 47% to 54%.

In response to the looming tax changes, senior representatives from the Big Four accountancy firms and related trade bodies have commenced discussions with government ministers.

The industry is examining the government's intentions, questioning whether the proposal is a definitive plan or a litmus test, FT report added, citing sources.

There is speculation that firms might pass on the additional tax costs to clients, including the UK government, which reportedly has spent substantial sums on contracts with the Big Four accountancy firms and LLPs.

Some senior partners are also said to be considering "alternative structures" for their businesses to mitigate the tax impact.

These alternatives range from incorporating as a classic "limited" corporate structure, adopting a general partnership model, or even relocating some services outside the UK.

Contingency planning is said to be already underway within some firms.

A partner at one of the Big Four accountancy firms told the media outlet: “We have to think of the UK as to whether it’s competitive. I do understand the challenges the chancellor is facing and the need to collect tax, but we can’t put the UK at a competitive disadvantage.”

"UK accountancy firms lobby against anticipated tax changes" was originally created and published by The Accountant, a GlobalData owned brand.

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