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HMRC internal manual

Employment Status Manual

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Salaried Member: Condition A: Example

This example illustrates the application of Condition A and the process of determining if the condition applies

 

M becomes a member of an LLP on 1 July 2014 and arrangements are made that in return for working for the LLP, M will receive a fixed salary for the period from 1 July 2014 to 30 June 2015. It is expected that a new annual arrangement will be put in place from 1 July 2015.

 

The relevant time at which Condition A is to be determined is 1 July 2014 being the date when M became a member and the relevant arrangements were put in place.

The relevant arrangements are the remuneration arrangements for the period from 1 July 2014 to 30 June 2015. The items to look at are the LLP agreement, including any personal terms agreed with M and also whether these reflect what will happen in practice, see ESM61015.

The relevant period is from 1 July 2014 to 30 June 2015, the latter date being the date on which it is expected that the arrangements will end, see ESM61020.

M’s services are the work that M will do for the LLP in the capacity as a member in the period from 1 July 2014 to 30 June 2015.

On 1 July 2014, it is expected that M will receive a fixed salary for the period from 1 July 2014 to 30 June 2015.

It is therefore reasonable to expect that at least 80% of the amount payable for M’s services under the arrangements in place for that period will be Disguised Salary and Condition A will be met.

The determination will apply until the end of the 30 June 2015 unless the relevant arrangements change during the period.