UK lawyers attack reported budget tax hike proposal

LONDON (Reuters) -British lawyers have hit out at a reported proposal that finance minister Rachel Reeves could increase taxes on partnerships typically used by lawyers, accountants and family doctors, saying it would set back her plan to speed up economic growth.

The Times newspaper said this week that Reeves was considering a new tax on people in Limited Liability Partnerships to help fill a spending shortfall of up to 30 billion pounds ($40.26 billion) in her budget on November 26.

LLP partners are currently treated as self-employed and are not subject to employer national insurance contributions.

A report by the Centre for the Analysis of Taxation think tank last month said changing the rules could affect around 200,000 people and raise around 1.9 billion pounds in tax.

David McNeill, director of public affairs at the Law Society of England and Wales, which represents solicitors, said the move could damage the legal profession, which he said was central to growing the economy.

"Law partnerships don't get the same tax breaks for investment as other businesses but are now having to pay the same levels of tax," he said. "On top of that, law firms are facing the risk of new regulation costs and bureaucracy. This makes no logical sense as a joined-up growth strategy."

Dan Neidle of the Tax Policy Associates, which works to improve tax and legal policy, said there was merit in looking at changing the policy on LLPs.

But he warned that any attempt to carve out family doctors from the plan, as reported by The Times to be under consideration, by applying it only to LLPs and not general partnerships would be a mistake.

"That would be a serious error which would create unfairness and economic distortion, and open up avoidance opportunities," he said on his website.

($1 = 0.7451 pounds)

(Reporting by Kate HoltonEditing by William Schomberg)

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