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HMRC Announces Change for ‘Salaried Partners’ in LLPs

30th Oct 2013
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The Government is planning changes to the taxation system applying to Limited Liability Partnerships.  From 6 April next year, the intention is to categorise “salaried partners” as employees for tax purposes.  This will result in an increase in costs for such partnerships, as a result of extra National Insurance Contributions becoming due, plus an adverse impact on cash flow, because of the new requirement to pay PAYE/NIC on a monthly basis.

The charges will be brought in as part of wider measures on ‘disguised remuneration’

Anyone involved in such arrangements should seek advice to determine how best to proceed in future. 

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By Willow67
30th Oct 2013 20:52

Corporate Members of LLP

Thanks for the post Paul.

Do you have any views on how corporate members of LLP's will be treated after the Autumn statement? I have heard that the profit assigned to the corporate member could potentially be taxed on the owner(s) of the corporate body.

Also, I seem to recall hearing that if all members of the LLP are corporate bodies then there would be no problem taxing the profits at corporate rates? I am unsure as to why this would be acceptable whilst an LLP with a mix of corporate and non-corporate members would not? Perhaps I am not aware of all of the facts.

Any comments would be greatly appreciated.

 

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Replying to Accountant A:
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By Paul Eaves
01st Nov 2013 10:59

 Thanks for your response
 Thanks for your response Willow.

 

HMRC have yet to publish details of the consultation responses/reaction with consultation closing on 9 August 2013.  As such nothing is set in stone.

 

According to the consultation document, the proposal in general terms was for the partnership profits to be re-allocated to the other partners (who would likely be the owners of the corporate body in such circumstances).  HMRC did state that the proposals would not be designed to target commercially justified structures, however it remains to be seen how that would be defined.

 

I would presume the rationale behind targeting mixed partnerships is that corporate only partnerships are already paying tax at the same rates (subject to marginal and small company rates).  Clearly, if the Government really wanted to prevent abuse they could set tax rates on corporates and individuals at the same rate and remove the temptation altogether!

Thanks for your response Willow.

 

HMRC have yet to publish details of the consultation responses/reaction with consultation closing on 9 August 2013.  As such nothing is set in stone.

 

According to the consultation document, the proposal in general terms was for the partnership profits to be re-allocated to the other partners (who would likely be the owners of the corporate body in such circumstances).  HMRC did state that the proposals would not be designed to target commercially justified structures, however it remains to be seen how that would be defined.

 

I would presume the rationale behind targeting mixed partnerships is that corporate only partnerships are already paying tax at the same rates (subject to marginal and small company rates).  Clearly, if the Government really wanted to prevent abuse they could set tax rates on corporates and individuals at the same rate and remove the temptation altogether!” 

 

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By Paul Eaves
01st Nov 2013 10:57

Corporate Members of LLP

Thanks for your response Willow.

 

HMRC have yet to publish details of the consultation responses/reaction with consultation closing on 9 August 2013.  As such nothing is set in stone.

 

According to the consultation document, the proposal in general terms was for the partnership profits to be re-allocated to the other partners (who would likely be the owners of the corporate body in such circumstances).  HMRC did state that the proposals would not be designed to target commercially justified structures, however it remains to be seen how that would be defined.

 

I would presume the rationale behind targeting mixed partnerships is that corporate only partnerships are already paying tax at the same rates (subject to marginal and small company rates).  Clearly, if the Government really wanted to prevent abuse they could set tax rates on corporates and individuals at the same rate and remove the temptation altogether!

Thanks (0)