Boston Consulting Group (BCG) is the latest professional services firm to be scrutinised by HMRC over its partnership structure and tax calculations for senior staff.

The tax authority is conducting an inquiry into how the consulting group determines whether its partners are technically self-employed or employees for income tax and national insurance contribution (NIC) purposes, according to BCG’s recent Companies House filings.

The consulting firm, which employs around 33,500 people globally, said in the filings it had hired external legal counsel to help examine its approach to the so-called salaried members rules, which apply to all firms that follow the LLP structure.

“The matter is under discussion, and the partnership has engaged external legal counsel who has affirmed the partnership’s position on the matter,” the filings said.

The consulting group added in the filings that if HMRC’s “position were ultimately upheld, the partnership could become liable for additional tax and any associated interest and penalties, which, depending on the outcome, could have a material impact on the financial statements.”

“The outcome, amount, and timing of this matter remain uncertain and cannot be reliably estimated,” the filings said.

The LLP model came into force over 25 years ago and is used by many firms across the professional services industry, including law firms, accountancy firms, and consultancies. It is a structure in which members, known as partners, invest their own capital, take on the risk, and in return, do not pay corporate tax on their profits.

A BCG spokesperson said in a statement: “We comply with all of our global and local tax obligations wherever we operate. As set out in our latest UK LLP accounts we are currently in discussion with HMRC and will not be commenting further while those discussions are ongoing.”

HMRC declined to comment.

Sarah Curzon, tax partner at MHA, told the fresh inquiry “should make professional-services LLPs sit up and take notice.”

“The financial exposure from getting this wrong can be substantial once employer’s NIC, interest and potentially penalties are considered. Professional firms therefore need robust evidence supporting their position, not simply an LLP agreement that calls someone a partner,” Curzon said.

HMRC’s watchful eye after LLP tax ruling

The confirmation of HMRC’s probe into BCG comes after a landmark £200m Supreme Court ruling in July which sent shock waves through the City’s professional services industry.

Supreme Court judges ruled against hedge fund Blue Crest Capital Management, run by billionaire Michael Platt, and unanimously rejected the argument that its partners were technically self employed and therefore not subject to the same income tax and national insurance treatment as normal employees.

The court ruled that partners in a Limited Liability Partnership (LLPs) must be taxed as employees rather than as self-employed profit-sharers, leaving the hedge fund facing a near £200m tax bill as a result of the ruling.

Curzon said following the ruling, “this is clearly an area in which HMRC is prepared to challenge whether individuals described as partners genuinely meet the tax tests for partnership status.”