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HMRC internal manual

Employment Status Manual

Salaried Members: Anti-Avoidance: Non-recourse loans


If the member obtains a non-recourse loan to finance a capital contribution then it is likely that HMRC would consider the TAAR to be in point.


*Example *

This example describes a non-recourse loan.

W is a junior member of the ABC LLP and she has only invested a nominal amount of capital. Conditions A and B are satisfied. W receives a limited recourse loan to raise her capital so that Condition C is not satisfied. In reality, the money makes its way back in a circle to the lender.

The main purpose of the loan is to enable W to avoid being a Salaried Member. The additional capital is ignored, Condition C is satisfied and W is a Salaried Member.

The position would be unchanged if the arrangements were put in place for one or one hundred members. A main purpose is to enable a member, or a number of members, avoid being a Salaried Member.