This guidance note covers the salaried members rules which are anti-avoidance provisions which treat partners as employed rather than self-employed if all necessary conditions are met. They were introduced to counteract the disguising of employment relationships through LLPs. Where the ‘salaried members’ rules apply, they bring a member of an LLP within payroll immediately. Therefore, members caught by this rule may be liable for PAYE.
For further information on salaried members, see Simon’s Taxes B7.514 and HMRC manuals from PM250000 onwards.
Salaried members of LLPs
The ‘salaried members’ legislation affects LLP members who receive earnings which are more akin to salary than genuine profit.
If the three conditions for salaried members are met, an individual member of an LLP is to be treated as an employee by the LLP for tax purposes only. All rights and duties as a member of the LLP are to be treated as if they were agreed under a contract of service.
This means that shares of profit will be treated as salary subject to income tax
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