Professional and business services - one of the government’s eight priority growth sectors - contribute more than 12% of UK GDP. LLPs are a vital part of that ecosystem, enabling firms of all sizes – from global partnerships to regional practices – to operate responsibly, invest in people and serve clients around the world from the UK.

Alan Vallance said: “There are more than 680 ICAEW member firms structured as LLPs. Many are small or mid-sized, supporting local businesses and communities. LLP partners are not employees, they are owners who invest their own capital and take on business risk. Treating them as if they were employees fundamentally misrepresents the model.

“We fully understand the fiscal challenges any government faces, but this particular proposal will not achieve its goal. A policy designed to raise revenue could end up raising less – shrinking the UK tax base, slowing growth, and undermining the stability and competitiveness that business needs to invest with confidence.

ICAEW has highlighted several unintended consequences of the proposed change, including:

• Lower overall UK tax receipts, as firms restructure or incorporate to remain competitive.
• Increased offshoring of high-value work, shifting jobs and investment abroad.
• Disruption to a priority growth sector that underpins innovation, exports and productivity.
• The greatest impact falling on small and mid-sized regional firms that support local economies.

Vallance added: “ICAEW recognises the need to strengthen public finances, but tax policy must be coherent, evidence-based and aligned with the UK’s long-term economic ambitions. We’re calling on the government to consult properly before any change is made, to commission a fundamental review of the UK’s tax structure – the first in decades, and to consider balanced, short-term alternatives that raise funds without harming growth.”

ICAEW has written formally to the Chancellor to make clear the unintended consequences of the proposed change and urging a period of consultation, a full review of the tax framework, and consideration of alternative measures, such as modest adjustments to Class 4 National Insurance Contributions.

Vallance concluded: “Good tax policy should strengthen the economy, not constrain it. ICAEW and our members stand ready to work with government to get this right.”

ENDS

Notes to editors: