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Tax bomb: Prepare for the April 2014 tax changes to UK LLPs

Is your profit share ‘disguised salary’? Louis Baker suggests some actions to ?take before the UK LLP tax legislation comes into effect on 6 April 2014

22 January 2014

The UK government announced fresh legislation in early December 2013 attacking the tax status of many members of LLPs. HMRC also published draft guidance on the interpretation of the proposed legislation at the same time. The legislation is due to be effective from 6 April 2014, so firms have little time to consider their position and to effect any change in their arrangements if they wish to ensure that they are not affected by these new rules.

Members of LLPs who are treated as salaried members will be taxed as employees rather than self-employed partners from 6 April 2014. The biggest consequence will be the employers’ national insurance contributions (NIC) burden on the firm, at 13.8 per cent of the individual’s income from that date.

Proposals vs. consultation

The proposed changes are aimed at those who do not have what H...

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