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With effect from 6 April 2014, new legislation is proposed, as a result of which some salaried or fixed share members of an LLP will lose their self-employed status and become employees for tax purposes.
The main impact of this is that employer’s national insurance at 13.8% will be due on their remuneration/drawings. This is obviously a major cause for concern, as it will impact many businesses, some of which are already cash strapped.
There was a consultation process with HMRC earlier in the year but the proposed legislation has been drawn much wider than was anticipated. As a result, many UK LLPs will need to consider whether they have members who will be reclassified as employed and if so, whether or not the LLP Members’ Agreement and/or compensation structure needs to be amended to address at least one of the three criteria that HMRC has set, whereby members would be treated as self-employed.
In line with recent tax legislation, there are extensive ‘anti-avoidance’ provisions, so mere window dressing will not be enough.
So how can we help? We can assist you in reviewing your current arrangements and form an opinion as to whether or not any of the current members are at risk of reclassification. If they are, we can work with you to formulate a revised approach and to produce documentation aimed at retaining self-employed status for members, where this is practical.
If you require any further information please contact Samantha Billingham on 01392 687651 or by email at samantha.billingham@michelmores.com.
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