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Salaried members of limited liability partnerships (LLPs) will be classed as employees under changes to the taxation of partnerships, HMRC have announced.
The move follows the consultation on proposals for addressing the disguising of the employer/employee relationship through membership of LLPs.
The responses highlighted the problem of disguised employment arising from the interaction of the Alternative Investment Fund Managers Directive (AIFMD) and the existing partnership tax rules on alternative investment fund (AIF) managers who operate as a partnership.
Salaried members of limited liability partnerships (LLPs) will be classed as employees under changes to the taxation of partnerships, HMRC have announced.
The move follows the consultation on proposals for addressing the disguising of the employer/employee relationship through membership of LLPs.
The responses highlighted the problem of disguised employment arising from the interaction of the Alternative Investment Fund Managers Directive (AIFMD) and the existing partnership tax rules on alternative investment fund (AIF) managers who operate as a partnership.
The Revenue plans to address the matter through the introduction of a statutory tax mechanism, as part of the partnerships changes.
The disguised employment legislation will disapply Limited Liability Partnership Act (LLPA) 2000, s 4(4), which otherwise deems partners not to be employees for all purposes; categorise salaried members as employed earners; and ensure that no National Insurance class 4 charges arises on members categorised as employed earners.
The new mechanism will allow AIF partnerships to comply with the AIFMD rules in a way that will not result in individual partners paying tax on partnership profits they cannot access in the base year.
The measure will take effect from 6 April 2014, alongside other new legislation to tackle disguised employment through LLPs.
