New tax rules for LLP members

By Edward Hoare and Tanya Shillingford

The government has issued draft anti-avoidance legislation to be included within the Finance Bill 2014, which overrides the current presumption that a member of an LLP is self-employed for tax purposes and is not an employee. This is in response to HMRC concerns that individual members of LLPs are benefiting from being treated as self-employed for tax purposes, in circumstances where those members are effectively in the position of an employee.

The details that have been released include draft legislation, together with a technical note and guidance from HMRC. The new rules will take effect from 6 April 2014 and will apply to all UK LLPs, but will not apply to general or limited partnerships or to LLPs formed under the law of jurisdictions outside the UK.

Under the new rules, a member of an LLP will be treated as ‘a salaried member’ (i.e. employed), unless he fails any of the following three tests…

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