To ask His Majesty’s Government what assessment they have made of the Centre for the Analysis of Taxation’s proposal for increasing the National Insurance rate on partnerships, and of the impact of such an increase.
My Lords, the Government do not comment on tax speculation outside of fiscal events. The Chancellor will set out the Government’s fiscal plans at the forthcoming Budget.
My Lords, given that professional services contribute some 12% to GDP, and that almost all the UK’s leading accountancy and law firms operate as LLPs, has the Minister examined the potential for unintended consequences such as increased incorporation or outsourcing, which could reduce, rather than increase, the overall tax take? I originally tabled this Question to probe the bad but rumoured idea of taxing GP partnerships in this way. Can the Minister at least rule that out?
I am grateful to the noble Baroness for her question. However, she knows that I am not going to speculate or give a running commentary on the next Budget now. There has been much speculation, as is usual ahead of a Budget. A lot of that speculation is irresponsible. I am not going to comment on individual tax measures now. We will do things in the usual way. The Chancellor has asked the OBR to produce a new forecast. She will make decisions based on that forecast. We will set out our fiscal plans at the forthcoming Budget. The Chancellor will do so mindful of the importance of growth and investment to businesses and the economy.
My Lords, does the Minister, as an expert in taxation matters, agree that in reality, the great majority of those who are partners in limited liability partnerships do not have any of the autonomy of self-employed persons but are treated as having such autonomy, and that it would be logical for all those who are in reality employed persons to be treated in the same way by the tax system?
My Lords, does the Minister recognise that the self-employed sector creates growth and increases economic participation and that self-employed people are risk absorbers without access to various state benefits? Is the suggestion floated concerning LLPs potentially the thin end of the wedge to attach more tax to all self-employment? Possibly, there is an issue, in that LLP status transfers risk from partners to societies at no cost to the partners. If there is a moral case for payment for that risk transfer, surely, it must be separately investigated, not wangled through national insurance.
I am grateful to the noble Baroness for her question, the first part of which I agree with. On the rest of it, as she knows, I am not going to comment on individual tax measures right now.
My Lords, whether someone trades through a company or a partnership is a personal choice. That choice should not be incentivised by the national insurance system. It is wrong to hand incentives to rich accountants and lawyers to dodge employers’ national insurance just because they trade as partnerships. That differential treatment encourages abuse and avoidance strategies. Does the Minister agree, and if not, can he give reasons?
My reason is very simple: I am not going to speculate on the next Budget now. I am, of course, grateful for my noble friend’s expertise in these matters.
My Lords, will the Minister accept that it not speculation but fact that the legal services sector brought in exports worth £9.5 billion last year? Will he also accept that it is fact, not speculation, that to increase the tax burden would inevitably damage the ability of law firms to attract cases such as international arbitration and dispute resolution from abroad when we are in competition with Singapore, Dubai and other litigation centres?
I certainly agree with the first fact that the noble Lord set out, and I am happy to do so. On his second fact, that is inviting me to speculate, which I think I have made clear I am not going to do.
My Lords, without asking the Minister to speculate on what might be in the Budget, will he tell us what was meant when the Chancellor and the Prime Minister said they would not increase income tax?