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Converting to a LLP

Senior staff

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Has anyone come across the proposal to move all senior staff to a LLP and thus saving the employers NIC, I understand a lot of large firms have done this but would be interested to hear your thoughts on this? 

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By Wanderer
27th May 2022 07:45

Not come across it but sounds contrived and of course would need to be very carefully structured to actually avoid the employers NIC.

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By David Ex
27th May 2022 11:42

Jigs wrote:

Has anyone come across the proposal to move all senior staff to a LLP and thus saving the employers NIC, I understand a lot of large firms have done this but would be interested to hear your thoughts on this? 

New one on me. Do share what you’ve found out so far.

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By Paul Crowley
27th May 2022 14:45

Tread carefully
Salaried partners are just employees is my understanding of HMRC view
All risks are with the members of the LLP, so let them take professional advice from someone with PII and who has many such clients

Edit
Justin's links show the point I tried to make

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Replying to Paul Crowley:
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By Justin Bryant
27th May 2022 15:11

The trick to get around those salaried partner (LLP member) rules is explained in section 2 here:
https://www.icaew.com/insights/features/archive/ten-things-you-need-to-k...

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Replying to Justin Bryant:
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By The Dullard
27th May 2022 15:24

It's no trick, it's in the legislation. And the simplest method is to involve the individuals in the management.

Incidentally, the article is misleading in stating that members of an LLP do not have employment rights, without qualification.

It has been held in the Supreme Court that a member of an LLP is a "worker", entitling them to things that are understood by laypeople to be employment rights (not least because they are set out in the Employment Rights Act).

The rights of a "worker" include the right to paid holiday, working time rights, national minimum wage (I know!), etc

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Replying to The Dullard:
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By Jigs
27th May 2022 16:21

Thanks for this, I thought their rights are contractual rights as part of the LLP agreement rather than standard employment rights.

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Replying to Jigs:
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By The Dullard
27th May 2022 17:21

"Employees" are a subset of "workers". The Employment Rights Act (ERA) sets out various rights that are either available to all "workers" or just to "employees".

It was decided in the Supreme Court, in the case of Clyde & Co LLP v Bates van Winkelhof, that members of an LLP are "workers" within the meaning of the ERA. By inference, they are, therefore, entitled to the rights afforded to "workers" in the ERA.

https://www.bailii.org/uk/cases/UKSC/2014/32.html

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Replying to The Dullard:
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By Justin Bryant
30th May 2022 10:00

What good tax tricks do you know that are not based on legislation (and/or case law)?

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By Tax Dragon
27th May 2022 15:43

Do it, Jigs. You know you want to.

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By Tax Dragon
27th May 2022 15:55

Ref the previous responses, the starter-for-ten issue for me would be the intermediaries legislation, not the salaried partner rules.

It would also be interesting to see the arrangements tested against Rangers. And then Pt7A.

It should be said that everything I've just mentioned can be found in the set of tax rules I know least about.

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Replying to Tax Dragon:
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By The Dullard
27th May 2022 17:26

It's the agency legislation, rather than the intermediaries legislation, assuming multiple staff members. See the Serpol case.

https://www.bailii.org/uk/cases/UKFTT/TC/2011/TC01043.html

However you're assuming staff LLP provides a staffing service to operating LLP.

Consider the position though if staff LLP is a member of operating LLP and entitled to a fixed profit share plus an annual profit-related bonus, with members of staff LLP on a fixed profit share plus a proportionate share of the bonus pot and the right to participate in the management of staff LLP.

Direct membership of operating LLP with participation in management also works.

It could conceivably be done in a similar way where the operating entity is a limited company too.

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