Salaried members of LLPs - overview of measures in draft Finance Bill 2014

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Summary: Read this if you advise on setting up LLPs with individual members.From this April some individual LLP members will be treated as employees, subject to PAYE and employer’s and employee’s NICs.

Read this if you advise on setting up LLPs with individual members.

From this April some individual LLP members will be treated as employees, subject to PAYE and employer’s and employee’s NICs.

What are the new rules aimed at?

In short, using LLPs to avoid national insurance contributions (NICs).

The current tax rules allow LLP members to escape being treated as employees even though their relationship with the LLP resembles employment more than being a partner. For example, an LLP member may be treated as a self employed partner even if they have fixed remuneration, no role in management and limited exposure to risk. If they are not treated as an employee then the payments they receive from the LLP are not subject to employee’s or employer’s NICs.

The new rules are scheduled to take effect on 6 April 2014 and will apply to new and existing LLP members. Although the rules are likely to change to some extent before then, LLPs with individual members will need to start planning now.

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