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HMRC internal manual

Employment Status Manual

Salaried Members: Anti-Avoidance: Overview


The anti-avoidance legislation is intended to prevent people using artificial structures or arrangements to place members outside the scope of the Salaried Member provisions.

The anti-avoidance rules mean that in deciding whether an individual is a Salaried Member, no regard is to be had to any arrangements the main purpose, or one of the main purposes of which, is to secure that the individual (or that individual and other individuals) is not a Salaried Member.

In applying this test (Targeted Anti-avoidance Rule (TAAR)), HMRC will take into account the policy intention underlying the legislation, which is to provide a series of tests that collectively encapsulate what it means to be operating in a typical partnership. Those individuals whose terms are more like those of employees will be subject to tax and NIC in the same way as employees.

HMRC would not consider that genuine and long-term restructuring that causes an individual to fail one or more of the conditions to be contrary to this policy aim, see ESM64010.

This includes loan finance arranged for the individual member by the firm, provided that the loan is full-recourse, so that the risk is that of the individual and the individual bears all the costs of the loan.

The TAAR will apply where the individual does not bear all the risks and costs of the loan; or where the loan comes from the firm or a party linked to the firm.

In some cases, the lender provides a single loan facility for the firm and its members.  the TAAR is likely to apply if the loan to the member affects the level of loan available to the firm.

For further guidance on applying the anti-avoidance provisions where the individual is obtaining loan finance see ESM64015.

The legislation also prevents the misuse of the Salaried Member provisions as part of a scheme or arrangement to avoid the impact of the mixed membership partnership provisions, see ESM64050.