News - LLP members to be put on payroll

8th April 2014

Changes to tax rules will see previously self-employed lawyers and accountants being brought onto PAYE.

Salaried Member legislation will mean members of Limited Liability Partnerships (LLPs), whose work conditions closely match that of an employee, will now be treated as such for tax purposes.

HMRC was unable to confirm how many individuals will be affected by the law, but a Revenue spokesman said: “The majority of partnerships will not be affected by these changes as they are not LLPs employing salaried members.

“The partnerships affected are likely to be in the minority and are primarily large professional LLPs.”

Three conditions must be met before the laws – which came into force on April 6, 2014 – can be applied to a self-employed worker.

These are that the individual has, what HMRC describes as, a “disguised salary”; significant influence over the affairs of the LLP and capital contributions to the LLP are less than 25% of salary.

Colin Ben-Nathan, chairman of the Chartered Institute of Taxation’s (CIOT) employment taxes sub-committee, was disappointed that a recommendation by the House of Lords to defer introducing the rules before next year, but said: “There has undoubtedly been some abuse of the current rules with, for example, cleaners and seasonal agricultural workers being made partners to avoid national insurance.

“So the government was right to review the taxation of LLP members in the interests of fairness in the tax system.”

(Information sourced from Payroll World Magazine)

Share this article on your favourite social network