Salaried LLP members: where are we now?

The salaried members rules provide for the determination of an LLP member as either self-employed or employed for tax purposes. Following the BlueCrest case which provided judicial guidance on Conditions A and B of the rules, HMRC have changed their view on the application of the targeted anti-avoidance rule (in ITTOIA 2005 s 863G) in relation to Condition C. HMRC will now seek to apply the TAAR to arrangements under which members increase their contributions periodically as their remuneration changes in order to avoid Condition C being met. In the author’s view, HMRC’s change of view is inconsistent with the policy intention of the TAAR. Notwithstanding the flaws in HMRC’s revised interpretation, LLPs should be prepared for HMRC to challenge their capital contribution arrangements. As ever, a fact-specific analysis is required and maintaining records to support the position taken is of key importance.