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HMRC internal manual

Employment Status Manual

HM Revenue & Customs
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Salaried Members: Anti-Avoidance: Genuine finance


A genuine contribution made by the individual to the LLP, intended to be enduring and giving rise to real risk, will not trigger the TAAR.

The fact that the loan is arranged through the LLP does not trigger the TAAR.


*Example *

This example covers a genuine capital contribution.

P has been an employee of the DEF LLP. She has reached that point in her career where she is offered membership.

In order to become a member, P needs to invest in the LLP. She has some capital of her own, and the LLP arranges with the Bank for her to have a normal commercial loan to cover the balance. An undertaking is given that on P’s retirement from DEF LLP, the firm will pay back the loan directly out of P’s capital account and, if necessary, any undrawn remuneration, with full recourse against P if these amounts prove insufficient.

These arrangements have substance and will not trigger the TAAR.

They have not been put in place to enable P to avoid being a Salaried Member. P faces genuine risk, she has invested in the DEF LLP and she does owe money to the bank, which she will need to repay and, in the interim, she will have to pay interest.

Becoming a full member, on terms akin to those of a partner in a traditional partnership, is not avoiding being a Salaried Member.

The DEF LLP has organised facilities for a number of members as well as P.

As part of the arrangement, DEF LLP pays the interest as agent for the members, which is treated as a priority profit share for those members.

Although for practical reasons the LLP paid the interest centrally, they have then charged it out to the members so P has paid the interest.