11 Feb HMRC: Firms should be ready to apply LLP rules from April
Professional services firms operating as partnerships ought to be ready to comply with proposed taxation rules from 6 April despite concerns over their impact on business, HM Revenue & Customs has told the House of Lords Economic Affairs Committee.
HMRC and the Treasury are concerned that limited liability partnership (LLP) structures allow “disguised employment” to take place, whereby people who are ostensibly partners in fact have a guaranteed income and little decision-making power.
Under the draft proposals, partners must satisfy one of three tests in order to maintain their status. The first option is ensuring at least a quarter of their pay is profit-dependent; the second would see them contribute at least 25% of their ‘fixed pay’ to the firm’s capital; or the third option is to prove they have significant influence on the overall partnership.
If partners are deemed to be employees, then employer’s national insurance contributions at 13.8% will be due and other employment-related tax rules, such as benefits in kind and share scheme rules, will apply to them.
Source: http://www.accountancyage.com, accessed 11/02/2014