The following Owner-Managed Businesses guidance note Produced by Tolley in association with Jackie Barker of Wells Associates provides comprehensive and up to date tax information covering:
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 information on salaried members, Simon’s Taxes B7.514.
For review of Charles Tyrwhitt a tax case in this area see ‘Analysis - Tyrwhitt: when employees become partners’ by Dominic Stuttaford in Tax Journal, Issue 1498, 20 (31 July 2020)
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 and Class 1 NIC paid through PAYE. Also, any costs or assets which are made available personally to the member will be treated as benefits in kind.
The legislation has no bearing on whether a member might be considered to be an employee as a matter of employment law.
The member must be an individual and the services provided to the LLP must be done so as part of their rights and duties of membership. If payments are made to the member in a capacity other than as a member, they are not subject to the salaried member rules unless they fall within the anti-avoidance rules.
The three salaried member conditions are given in ITTOIA 2005, ss 863B–863D:
it is reasonable to expect that at least 80% of a member’s share of profit is ‘disguised salary’
the individual does not have ‘significant influence’ over the affairs of the LLP
the individual’s capital contribution is less than 25% of the amount of the disguised salary, it is reasonable to expect the member to receive
All three conditions must
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
Legislative definition of plant and machineryThe general rule allowing capital allowances on plant and machinery is given at CAA 2001, s 11. There is no statutory definition of the term ‘plant and machinery’ but there is confirmation in the legislation on what constitutes a building or a structure
This guidance note provides an overview of what conditions need to be met before a business is entitled to treat VAT incurred as input tax. This note should be read in conjunction with the other notes in the ‘Claiming input tax’ subtopic. For a flowchart outlining the procedure for claiming input
Personal representatives are responsible for finalising the deceased’s tax affairs. They must file outstanding tax returns and claim any repayments due.For many estates where the deceased’s tax was deducted under PAYE on pensions or employment, a refund is likely to arise because the deceased is
The corporate interest restriction (CIR) essentially limits the amount of interest expense a company can deduct from its taxable profits if the interest expense is over £2 million. The actual mechanics of the CIR calculation are highly complex (the legislation is over 150 pages long) and are
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.