Updated partnership guidance
Revised guidance on the deemed employment position for members in LLPs was issued on Friday of last week.
The outcome still appears to be that members of LLPs will have to comply with one of three tests or be treated as employees, it had been hoped that the widespread concern expressed over the new provisions and the fact that they will be in force before the Finance Act is available could persuade the government on a mitigation or at least a delay in implementation. The latest guidance indicates that, despite disquiet, the new regime is likely to take effect from 6 April 2014.
Under the draft proposals, members of LLPs must satisfy one of three tests in order to maintain self-employed status: -
- at least a quarter of their expected remuneration is profit-dependent;
- their capital contribution is at least 25% of their ‘fixed pay'; or
- they can demonstrate that they have significant influence on the overall partnership.
If partners are deemed to be employees, then for the LLP employer's national insurance contributions at 13.8% will be due while the individual will have a cessation of self-employment and subsequently fall under PAYE with the attendant provisions on benefits in kind, etc. This could put a big strain business and personal cash-flows.
Date: 25th February, 2014
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