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Rayner my parade! The importance of specialist advice.
Jemma Brimblecombe
The recent Upper Tribunal decision in the Bluecrest case has confirmed the earlier FTT decision which considered the salaried member rules for LLPs.
These rules were introduced in 2014 and treat a member of an LLP as an employee for tax purposes (with the resulting PAYE and NIC consequences) if three conditions are met. These conditions relate to:
The provisions treat as employees those partners who are in reality much more like employees than partners. These are partners whose remuneration is effectively “disguised salary” with little or no reference to the LLP’s profits, who do not have significant influence over the LLP’s activities and who contribute little or no capital to the LLP.
To be treated as an employee, all three conditions must be met. It is therefore necessary to fail at least one of the three conditions to be treated as self-employed for tax purposes.
Two of these conditions were considered in the Bluecrest case.
Whilst confirmation of the earlier FTT was not unexpected, the decision is helpful precisely because it does not disturb that earlier FTT decision, and so will likely be welcomed particularly by those who are currently in discussions with HMRC about the status of their members as well as by those who are part of a due diligence process relating to an LLP.
However, how the rules apply to each LLP will depend on the facts, and how each LLP operates and is governed will need to be considered carefully.
If you would like to discuss how the salaried member provisions might apply to you, please contact Matt Spencer or John Young.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
Jemma Brimblecombe
Charles Richardson
Oliver Oldman
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