LLP law is changing but the LLPs don’t seem to know

By Daniel Isaac

LLP law is changing but the LLPs don’t seem to know. Well, the legal and accountancy LLPs know, but I am not convinced that word has reached all their clients. Over the past month, I have reviewed documents for several prospective members of LLPs that fall foul of HMRC’s new rules on employees disguised as partners. As I have said in previous blog posts, it is highly questionable whether many members of LLPs should be treated as partners or employees. To date, both HMRC and the employment tribunals have allowed members to be treated as self-employed despite their having minimal or no exposure to the profits and loss of the LLP, small capital investments and little or no control over how the LLP is run. This has allowed many LLPs to save huge amounts of employers’ national insurance contributions by recasting high-earning employees as members of the LLP.

All this will change from 6 April 2014. Members will be taxed as employed if less than 20 per cent of their remuneration is linked to the overall profitability of the LLP, their capital contribution is less than 25 per cent of their fixed income and they lack significant influence over how the business is run.

Judging by the draft contracts I have seen being produced (in the financial services sector), not a lot of people have cottoned on to this and some LLPs and their members may be in for a nasty surprise in the 2014–15 tax year…

Click on the link below to read the rest of the Withers briefing.

Sign in or Register to continue reading this article

Sign in


It's quick, easy and free!

It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.

Register now

Why register to The Lawyer


Industry insight

In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.


Market intelligence

Identify the major players and business opportunities within a particular region through our series of free, special reports.


Email newsletters

Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.

More relevant to you

To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.

Briefings from Withers

  • Family law revolution

    22 April 2014 marked ‘the largest reform of the family justice system any of us have seen or will see in our professional lifetimes’, according to the president of the Family Division.

  • A day out with the Charity Tax Group

    Withers’ Graham Elliott discusses the points he found most interesting from this year’s Charity Tax Group annual meeting.

View more briefings from Withers

Analysis from The Lawyer

Browse This Firm’s


16 Old Bailey
City of London

Turnover (£m): 123.30
No. of lawyers: 313