Partnerships Update – Autumn Statement 2013 Edition

The wait is over and finally we have the draft legislation and HMRC Guidance Notes implementing the planned reform of taxation for LLPs.

This edition of Partnerships Update focuses on how HMRC's plans have changed from the plans originally mooted and what this means for your LLP.

1. Salaried partners

The whole idea of introducing LLPs was to provide a corporate vehicle that would be taxed in the same way as an (unincorporated) partnership.  Unfortunately the framers of the Limited Liability Partnerships Act 2000 went a bit too far in enshrining this principle.  They introduced a provision, or one might say a 'quirk', that had the effect that individuals who are members of an LLP were to be always taxed as if they were partners in a partnership established under Partnership Act 1890 (i.e. a traditional partnership) - even if they were engaged on 'salaried partner' terms – ie on terms that were closer to employment terms so that under existing tax law they would