Field Fisher Waterhouse (FFW) and Baker & McKenzie have become the latest firms to ask junior partners to contribute capital in response to upcoming changes to how partnerships will be taxed.

Baker & McKenzie is asking approximately 25 non-equity partners in its London office to contribute just above a quarter of expected annual earnings, in order to exempt them from employee status.

Given the majority of non-equity partners do not have any capital in the firm, it will be the first time most have had to contribute a stake.

Sources said junior partner remuneration at Bakers' London office is typically between £150,000 and £250,000 excluding a bonus, meaning those affected by the changes are likely to have to take out loans of at least £40,000 each.

Bakers is understood to be asking for capital contributions of a little over the minimum 25% required by the new HM Revenue & Customs rules in order to allow for some flexibility with conditions on the division of profits.

The firm is working to the 5 July deadline, meaning partners will be given a three month grace period after the changes come into effect on 6 April to secure a loan and make the contributions.

"As with most firms in the City we are looking at how the new rules for the taxation of limited liability partnerships apply to us," commented a Bakers spokesperson.

"We are reviewing current levels of capital contribution to ensure that we meet all the relevant tests and are confident that we will have taken all necessary steps by the deadline."

Meanwhile, FFW is looking at a similar deal for any of its 50 or so UK-based fixed-share partners who could be caught out by the new rules, though financial director Mike Giles anticipated that "not many" partners will be affected by the changes. The firm does not have any salaried partners.

A large proportion of the fixed partners' total remuneration is paid in monthly instalments alongside a performance related bonus element.

"Our aim is to ensure that all fixed share partners have a capital contribution of at least 25% of their expected remuneration and that none is taxed as an employee," added Giles.

"No percentage has been agreed for any additional capital contribution but we would not be looking for excessive increases although we would aim to ensure that the total capital contributed by each partner is not less than 25% of their anticipated total profit share, particularly given that this test needs to be satisfied every year."

Most UK LLPs are currently in the process of changing their membership agreements and capital contribution requirements in order to meet the April deadline.

The new tax rules are being ushered in because HMRC believes some fixed-share partners are avoiding employee tax, despite having a guaranteed income and little decision-making power.

Speaking to Legal Week last week, Daniel Sutherland, senior associate at Fox Williams, said: "For senior associates looking for promotion to the partnership, my sense is the capital requirements would be outweighed by the benefits. However, it does expose junior partners to much higher risk – given their capital stake in the business – for little or no equity."

Several commentators have also suggested most junior partners will have little choice in the matter.