Employees in partner’s clothing? HMRC in ‘aggressive pursuit’ of LLPs

HMRC is actively writing to limited liability partnerships (LLPs) as firms race to reassess their members tax status after the landmark legal ruling, even as both sides hold their cards close to their chests. Members of an LLP are treated as self-employed partners, meaning they don t pay the 15 per cent employer’s national insurance contributions on their pay. In order for firms to avoid tax by just naming staff as partners , the salaried member rule was put into place. Under this rule, a member is legally deemed an employee for tax purposes unless they don t meet at least one of three specific conditions. But in July, the Supreme Court delivered the first major ruling on how these conditions work in practice in a case against hedge fund Bluecrest Capital Management, founded by the UK’s wealthiest financier, as the taxman successfully argued that the firm s portfolio managers were functionally employees. The decision threw a spanner into the LLP model and emboldened the ta