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HMRC internal manual

Employment Status Manual

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HM Revenue & Customs
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Salaried Member: Disguised Salary: Profit share: Tranches of reward

ITTOIA/S863B

This section looks at the position where the profits shares vary with the level of profit made.

 

*Example *

This example looks at tranches of reward, where the profit sharing arrangements vary depending on the amounts of profits made.

 

P works for the UVW LLP. She has no salary, but has a 10% profit share for the first £1m profits, reducing to 5% above that figure. Profits may or may not exceed £1m.

 

P’s profit share varies by reference to the actual profits. Whilst the percentage varies, it is all profit-related. P does not satisfy Condition A.

Please note that for this example it is assumed that there is practical risk that the LLP makes less than £1m of profits; if not, P will receive Disguised Salary of £100,000 plus a profit share.