Limited Liability Partnerships

Mr. Mitchell: To ask the Secretary of State for Trade and Industry what estimate he has made of
the number of plcs likely to register as limited liability partnerships under his proposed new
legislation. [124381]

Dr. Howells: No such estimate has been made. For a number of reasons we would be surprised
if plcs converted to LLPs. There are no shareholders in an LLP, and no provision for the public
listing of an LLP. Shareholders in a plc would have to become LLP members, and would be
subject to, for example, the potential "clawback" liability of the new section 214A to be contained
in regulations applying the Insolvency Act 1986. Treating LLPs as partnerships for tax will mean
that each member will be taxed on their proportionate share of the whole of the LLP's income and
capital gains. This would make both the LLP's and the members' tax calculations extremely
complicated, with the individual members having to pay that tax through self assessment. Further,
if an LLP restricted what the members could draw out because it wanted to retain profit for
working capital then taxing each member on their proportionate share of the whole of the LLP's
profit could mean they paid more tax than they had received. This would give the appearance that
they were suffering an effective tax rate of over 100 per cent.

Mr. Mitchell: To ask the Secretary of State for Trade and Industry when the consultation on the
good faith provisions of the Limited Liability Partnerships Bill will be completed. [125346]

9 Jun 2000 : Column: 386W

Dr. Howells: The consultation paper, "Regulatory Default Provisions Governing Relationship
Between Members" (URN 00/617) published in February, sought comments on whether it was
appropriate to include express statutory provision that members of an LLP owe a duty of good
faith to each other. The consultation period closed on 7 April, and the summary of responses
(URN 00/865) published in May set out the conclusions reached.

Mr. Mitchell: To ask the Secretary of State for Trade and Industry what consultation he had with
the Federation of Small Businesses about the opportunities for small businesses to become limited
liability partnerships before the Limited Liability Partnerships Bill was introduced. [125345]

Dr. Howells: A representative of the Federation of Small Businesses met my officials in October
1999 and has also been in correspondence with them.