
Members of a Limited Liability Partnership (LLP) are normally treated as self-employed for tax purposes. However, special rules can apply where a member's terms of membership are more akin to the terms of an employee than a partner in a traditional partnership. These are known as salaried members.
The legislation applies a three-part test. A member will be treated as a salaried member for tax purposes only if all three conditions are met:
- Condition A – Disguised salary: At least 80% of the member's remuneration is fixed, or any variable element is not linked to the LLP's overall profits or losses.
- Condition B – Lack of influence: The member does not have significant influence over the affairs of the LLP.
- Condition C – Insufficient capital stake: The member's capital contribution is less than 25% of their expected annual remuneration.
To fall within the salaried member rules, an individual must perform services for the LLP in their capacity as a member. Some LLPs will strive to ensure that at least one of the conditions set out above does not apply to ensure these rules do not apply.
In addition, the rules do not apply to:
- Companies
- Individuals who only invest capital in the LLP
- Former active members who no longer provide services but continue to receive a share of profits.
by Admin
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