Yes, sympathy for lawyers is in short supply but the government’s rumoured extend on National Insurance (NI) charges to members of LLPs could have ripple effects far beyond the legal profession.
What is an LLP?
- An LLP is a unique business structure that combines the benefits of both partnerships and corporations.
LLPs are a cornerstone of the UK’s professional services economy, a sector that is one of our few global success stories. Law, accountancy, consultancy, architecture, engineering and design firms all rely on the flexibility and partnership-driven ethos that LLPs provide. Together, these industries generate billions in exports and underpin the UK’s position as a world leader in high-value, knowledge-driven services.
Under the current system, LLP members are treated as self-employed for tax purposes. As such, LLPs do not pay the 15% employer’s National Insurance Contributions that traditional companies must pay on employee salaries. This creates a differential in tax treatment – one that the Chancellor, Rachel Reeeves, is reportedly keen to close in her first Budget as part of her pledge to ensure that ‘those with the broadest shoulders pay the fairest share’.
If implemented, such a change could materially alter the economies of partnership structures. The Treasury may see this as fair alignment, but many across the professional services landscape fear it could do more harm than good.
The issue is not confined to multi-million-pound law firms, LLPs are also used by GPs, architects, small consultancies, teach/creative and joint ventures. A one size fits all approach could hit these smaller partnerships the hardest, despite them posting little or no “avoidance” risk. Targeting a perceived inequity at the top end could therefore, unintentionally, damage the viability of hundreds of smaller businesses that rely on LLP flexibility to grow and compete.
At macro level, the UK’s professional services sector has been one of its few consistently strong export performers. Introducing new taxes that raise the effective rate on partners risks undermining the very structure that make the sector competitive. Other jurisdictions, from Ireland, Singapore to the UAE and parts of the US, are actively reducing friction for professional firms, not increasing it. If the UK wishes to champion high-value, knowledge-based industries, it cannot simultaneously make the organisational frameworks underpinning them less viable.
For now, the proposed reform remains a rumour, but one with potentially wide-ranging consequences. It would represent a significant policy shift in how the UK treats professional and consulting partnerships, with knock-on effects for employment models, remuneration structures, and cross-border competitiveness.
The Beyond Corporate Law Team are closely monitoring developments and can assist clients seeking to reconsider their company structures.
If you’re considering how this potential reform could affect your business, please do not hesitate to contact us at [email protected]
