Solicitors in the Sheffield region are being warned that they may have to make changes in the way they operate as the Government looks to tackle “disguised employment” in limited liability partnerships (LLPs).
New rules being brought in by HM Revenue and Customs (HMRC) mean that those working in LLPs, which are particularly prevalent in the legal profession, will lose their self-employed status and be treated as employees unless they can satisfy certain conditions.
“There has always been a default legal presumption that individual members of LLPs are self employed for both income tax and National Insurance purposes but HMRC are set to remove this assumption.
“Their concern is that some members are, in reality, employees and as a result the LLP is avoiding not only employers’ national insurance charges but also PAYE obligations.
“HMRC say there is increasing evidence that LLPs are increasingly being used and marketed as ways to avoid employment taxes and they are determined to tighten up the rules.”
Simon says that in future individual members will be classed as employees, and not self-employed, if they receive at least 80 per cent of their remuneration through fixed salary payments, do not have significant influence over the partnership and whose contribution to the LLP is less than 25 per cent of their salary payment.
Traditional partnerships are not affected by the new tax rules.