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Taxation of LLP profits

How is members remuneration treated as an expense taxed?

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I am seeing a client who has forwarded me the 31 March 2017 LLP accounts. There are 4 members and there is an amount of £500k as members remuneration treated as an expense. This leaves £12k profit which the client is saying is the profit shown on the LLP tax return. The £125k for my client is then reported as income on a second partnership tax return for him and his wife. Personal expenses (assumed business but not paid by LLP) are deducted and the profits are shared 60:40 between them.

I can't see that the treatment of the members remuneration is correct but cannot find anything in the legislation to support my arguement.

I don't deal with many LLP's and so readers thoughts are greatly appreciated.

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By Portia Nina Levin
08th Feb 2018 12:06

My first thought is that you shouldn't be dealing with this one either.

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By Marion Hayes
08th Feb 2018 12:55

Agree with Portia - not a small business so implications of being outside your comfort zone are not good. Who prepares the LLP accounts?

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Replying to Marion Hayes:
By Cowders72
09th Feb 2018 08:25

Thanks all
I don't think he is a salaried partner. They are a firm of IFA's and will each have their own fee base and I think the amount concerned is the profit for their own client base. I think it is correct for the accounts but should not be treated as an expense for tax.
Then splitting his profits with his wife compounds the position and I would have thought it should get caught within the income shifting legislation.
A small local accountant prepares the LLP accounts and I won't be doing that. They are looking at the tax position when members join and leave and I will be advising on that but want to warn him if there could be issues.
Thanks again. Any help really appreciated

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