Wragge Lawrence Graham & Co

UK 200 2014 position: 28

What’s in a name — HMRC partnership tax changes

On 10 December 2013, HMRC published the 2014 Draft Finance Bill. Among the proposed changes is a proposal to address what the government views as disguised employment of individuals working as salaried partners in an LLP. The new rules will come into effect from 6 April 2014 (although anti-avoidance provisions came into force from 5 December 2013).

Under the old rules, there was a presumption that a partner (or member) of an LLP was a self-employed individual. Such a status brought national insurance savings for firms. HMRC was concerned that some firms were labelling relatively junior employees as ‘partners’ in order to take advantage of these savings. Generally, HMRC is content to treat a partner as self-employed where they properly share in the decision making and the risks of the LLP as a whole.

The draft legislation sets out that HMRC will treat a salaried partner who is a member of the LLP as an employee of the LLP where…

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