The impact of the Finance Bill 2012 tax changes on professional practices themselves will generally be fairly modest. However, some of the detailed changes in relation to Enterprise Investment Schemes and Venture Capital Trusts will be of interest to partners in a personal capacity. International firms will need to be aware of developments in connection with the taxation of non domiciled individuals, and also the statutory tax residence test which has been postponed for 12 months.

Baker Tilly analysis

As with any large and complex Finance Bill, professional firms need to consider the impact from three perspectives. First, do any of the proposed tax changes affect the business of the firm?  Second, does the Finance Bill bring with it opportunities – or adverse changes – in respect of the tax position of the partners? Third, and this is in no particular order, do opportunities and threats arising from the Finance Bill provide new fee-earning opportunities for the firm in respect of the services it provides to its clients?

In detail

With more than 1,100 pages of draft legislation and explanatory notes, most professional firms will find new opportunities for advising their own clients. 

For the firms themselves, the effect of the proposed tax changes on their business is likely to be small.  There will of course be exceptions. International firms with a corporate structure, or a part-corporate structure, will need to be aware of changes affecting controlled foreign companies.  After many years of consultation, uncertainty and policy change, the changes are designed to make the current CFC rules easier to operate, more competitive internationally and to benefit as many businesses with both UK and overseas presence as possible. How the proposed changes will affect particular firms requires detailed scrutiny. 

For partners in firms, facing top rates of UK income tax of 50% coupled with restrictions on the amount that they can invest in pensions, the issue of providing adequate post-retirement income is extremely topical. Investments in qualifying companies within the Enterprise Investment Scheme, or Venture Capital Trusts, continue to qualify for various tax reliefs to help offset the risks of investment in these companies. Changes are being made to increase the investment thresholds, ensure that lower-risk companies are excluded and introduce a new Seed Enterprise Investment Scheme to benefit smaller, early-stage companies which are raising equity.