On the 6^th October 2011 the Legal Services Act brought about a widely discussed change to the legal profession. On the very same date the Council for Licensed Conveyancers agreed to the first Alternative Business Structure (ABS), Myhomemove, but what is an ABS and can it help you?

The new ABS rules have been dubbed “Tesco Law” on the basis that Tesco sell pretty much everything and will probably want to sell legal services too. The new law enables non SRA regulated investors to own and manage a business that provides legal services as long as there is someone in the group who is a member of the SRA and agrees to self-regulate the services provided.

Although most existing solicitors’ firms are unlikely to bring in external investors, the ABS rules create some very interesting tax planning options that will benefit the owners, the business and also some of the more senior staff too. In particular, an opportunity to set up what are known as hybrid partnerships (a mixture of people, limited companies and perhaps even other LLPs) creating a wide range of benefits to you.

The Solicitors Regulation Authority, (SRA), have released a revision to their handbook, and have said they await applications for ABSs from the 3^rd January 2012, so from this date ABS’s will be available for solicitors and not just Conveyancers.

For further advice please contact us on (01474) 853 856 and ask to speak to Emma White, Mark Goodfellow or Matthew Finch.

When running your own practice, it is of paramount importance to have in place the business structure which is most appropriate to your needs and allows you the freedom to do what you do best.

Solicitor’s practices such as yourself, have traditionally traded as unincorporated partnerships due to the flexibility offered by this structure but there have always been demons associated with these arrangements, mainly the threat of "joint and several" liability for actions performed by other partners.

After much lobbying by professionals, the option of running your business through a Limited Liability Partnership (LLP) was made available to you from April 2001. Great news for solicitors at the time!

Although LLPs have their own legal identity, from a tax point of view, they are transparent and face no tax bill on their profits. Instead the partners (officially known as "Members") are on their share of any profits or gains whether they have actually been paid those profits or not. In this respect, an LLP is effectively the same as any other partnership.

As a result, partners are left facing large tax liabilities on profits tied up in working capital. Some practices became limited companies but then found that they lost the flexibility and in some cases had to compensate partners with (very tax-Inefficient salaries) where they could not take dividends.

To achieve tax-efficiency and retain flexibility the hybrid partnership was created; a mix of people and at least one company. A4G have been working on this area since 2002 and are widely recognised as one of the pre-eminent specialists in this area. Allied to their experience of acting for solicitors, they have created a specialist service just for solicitors. 

If this increasingly popular structure sounds of interest to you, then please contact us on (01474) 853 856 and ask to speak to Emma White, Mark Goodfellow or Matthew Finch.

As well as creating flexibility amongst existing partners, the new ABS rules enable you to create flexible and tax-efficient arrangements with younger members of your team who have the potential to be full partners of the future but not the equity to buy in.

The interests of such individuals can be ring-fenced within what A4G refer to as sub-LLPs within the structure and partnership arrangements can provide a level of protection and assurance to those individuals that acts as an ideal stepping stone to future partnership. Furthermore, such a structure gives rise to further tax savings for both the individuals concerned.

To find out more please do not hesitate to contact Emma White, Mark Goodfellow or Matthew Finch on (01474) 853 856.

If you have organised your business affairs by utilising the trading structure outlined in The Ultimate Tax Efficient Business Structure for Solicitors then you have the opportunity to make tax efficient and unrestricted investments.

One of the most frequently used methods of investing business cash is via a pension. Pensions are extremely tax efficient, but are unfortunately restricted in the types of investments they can make.

Alternative ways of structuring your affairs in order to tax efficiently invest business cash is by utilising an investment hybrid partnership.

These structures allow investment into any type of asset including foreign and UK based property as well as classic cars. The main benefits of utilising our specialist UK based strategies include;

• No higher rate tax payable personally on the money used to make the investment
• Cash invested net of low corporate rates of tax (20%) as opposed to high personal tax rates (50%) 
• The ability to dispose of assets and realise cash (unlike pensions)
• No restrictions on the type of assets that can be purchased
• Separation of trading and investment activities which provides protection for your investments

If you are thinking of making an investment and would like to find out more on how to make the purchase in a tax efficient and flexible manner, then please do not hesitate to contact Emma White, Mark Goodfellow or Matthew Finch on (01474) 853 856