We fully understand the fiscal challenges any government faces. Raising sustainable revenue in a fair and responsible way is vital. But this particular proposal will not achieve that goal. In fact, it risks doing the opposite – reducing the UK’s tax base, slowing growth in one of our most successful sectors and undermining the stability and competitiveness that business needs to invest with confidence.

Why this matters

Professional and business services are one of the government’s eight priority growth sectors, contributing 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.

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 ordinary employees fundamentally misrepresents the model.

Introducing an employer-style NICs charge on LLPs would have several unintended consequences:

• Lower UK tax receipts overall. Many firms would have little choice but to restructure or incorporate to remain competitive, reducing total tax paid in the UK and narrowing the domestic tax base.
• Increased offshoring of high-value work. Additional costs on UK partnerships could make overseas operating models more attractive, shifting jobs and investment abroad.
• Disruption to a priority sector. Professional and business services drive innovation, exports and productivity. Measures that hinder their growth will have wider economic impacts.
• Impact on smaller firms. The change would hit regional and mid-tier practices hardest – the very firms that underpin the local economy and employment.

In short, a policy designed to raise revenue could end up raising less, while weakening one of the engines of UK growth.

A better way forward

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.

That’s why we have called on the government to:

• consult properly with affected sectors before any change is made;
• commission a fundamental review of the UK’s tax structure – the first in nearly forty years – to ensure fairness, simplicity and competitiveness; and
• consider balanced, short-term alternatives such as modest adjustments to Class 4 National Insurance Contributions, which could raise funds without harming growth.

The UK’s tax system has become increasingly complex and piecemeal. A coherent review, led by experts and supported by evidence, would help build a simpler, fairer system that delivers sustainable revenue and supports investment, productivity and jobs.

Working together

ICAEW and our members stand ready to support that process. Our profession brings deep technical expertise, practical insight and a commitment to the public interest. We want to help shape a tax system that works – for government, for business and for society.

If you are an ICAEW member with views or evidence to share on this issue, please contact us below or through your member network. The more evidence we can collectively bring forward, the stronger our case for sensible, sustainable reform.

Good tax policy should strengthen the economy, not constrain it. We look forward to working with the government to get this right.

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