The ICAEW is reminding salaried members of limited liability partnerships (LLPs) who have, before 6 April 2014, agreed to increase their capital to avoid new legislation being applicable, that they must introduce the capital by 5 July or face being treated as employees from 6 April 2014 say Harris & Co accountants Northampton, the specialist small business accountants #accountantsnorthampton
From April 2014, new provisions introduced by Finance Bill 2014 will apply to LLPs. One of the three conditions for members of LLPs be treated as employees for tax purposes and, accordingly, have their pay subject to PAYE and Class 1 national insurance, is that the member’s contribution to the LLP is less than 25% of the disguised salary.
In order not to be caught under that condition, members need to make an injection of capital into the LLP to bring their contribution up to 25% or more of the disguised salary. The condition will be treated as broken for 2014–15 if the member gave an undertaking prior to 6 April 2014 that the capital would be introduced and it is actually introduced by 5 July 2014.
Those who join an LLP after 5 April 2014 are subject to similar rules, and must make a firm commitment, on the day they become a member of the LLP, to contribute an appropriate amount of capital; and that contribution must be made within two months of their admission.