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HMRC internal manual

Employment Status Manual

HM Revenue & Customs
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Salaried Members: Anti-Avoidance: Short term appointment

The TAAR may apply where an individual is on a short term appointment and makes a capital contribution so that Condition C is not met.

The point is that there is no intention for the appointment to last, the capital contribution is not for the enduring finance of the LLP.


*Example *

This example shows an individual joining an LLP for a short-term engagement with no intention of being a partner.

A is an associate in a US law firm Adfsf GP. He is to be seconded to the UK “subsidiary” entity Adsfg LLP for a two year period to provide general legal support. During this period, he will be rewarded almost wholly by Disguised Salary.

He and the LLP agree as part of his terms of engagement as a member that he must contribute capital of 30% of the Disguised Salary which will be repayable immediately after the end of the two years. The firm is extremely well capitalised and there is no real prospect of the capital being at risk. He is also given voting rights on matters which are expressed to be significant, but in reality he is a junior member with no significant influence over the firm’s affairs.

Neither the capital nor A’s involvement with the firm is intended to be enduring. His connection with the firm is like that of an employee on secondment rather than a partner, and there are from day one arrangements for his departure after a set period.

On the facts, the TAAR will apply.