UK Legal Firms Thwarted In LLP Plans

by Robin Pilgrim, LawAndTax-News.com, London

11 April 2003

Reports have revealed that several leading City law firms have been thwarted in their bids to become limited liability partnerships (LLPs) by European opposition to tax changes.

Allen & Overy and Freshfields Bruckhaus Deringer both confirmed to Legal Week that their hopes of becoming UK LLPs have - at least temporarily - been dashed by the refusal of certain foreign governments to accept the practice of taxing LLPs as partnerships rather than companies, as is currently the case in the United Kingdom.

This means that partners with the firms concerned in countries which tax LLPs as companies would be liable for tax on their UK income as well as on their local earnings. However, given the current litigious climate with regard to the related areas of corporate governance and shareholder, many law firms are keen to take advantage of the protection afforded by a limited liability partnership.

Speaking to the UK news service this week, an unnamed managing partner at a top City law firm revealed that:

'We are lobbying the German tax authorities but are in deadlock at the moment. We all hoped we could lobby them successfully, but we have hit a brick wall.'

'We do not want to push so hard that they will say 'no' forever, but I think it will take years to resolve.'

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