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HMRC internal manual

Employment Status Manual

Salaried Members: Implementation Matters: Individual

This part looks at the effect on the individual member when they cease to be a member and start to be treated as a Salaried Member.


This section looks at the period whilst they are treated as a member, and self-employed for tax purposes.


M has been a member of ARC LLP since 1 July 2010. ARC LLP commenced trading in 2001 and has had an accounting date of 30 June throughout. Prior to 6 April 2014, ARC LLP carries out a review of its membership as a result of the new Salaried Member rules.

The review shows that M satisfies all three conditions and so M will be a Salaried Member as of 6 April 2014.


For tax purposes, M will cease to be a partner of ARC LLP on 5 April 2014. This means that M’s basis period for the 2013/14 tax return will follow the cessation rules and run from the day after the previous basis period ends to the date M ceases to be a partner. A just and reasonable apportionment of profits earned from 1 Jul 2013 to 5 Apr 2014 should be included. M can also claim overlap relief in this final period.

M’s self-assessment returns will be as follows:


Tax Year Basis period Profits Overlap period Overlap profits/relief
    £   £
2010/11 1 Jul 2010 – 5 Apr 2011 60,000    
  2011/12 1 Jul 2010 – 30 Jun 2011 79,000 1 Jul 2010 – 5 Apr 2011 60,000
  2012/13 1 Jul 2011 – 30 Jun 2012 81,000
  2013/14 1 Jul 2012 – 5 Apr 2014 140,000   60,000



As of 6 April 2014, M will be an employee of ARC LLP for tax purposes. M’s entitlement under the LLP agreement is treated as coming from an employment. ARC LLP will need to account for PAYE on amounts paid or credited to M, including M’s monthly drawings and any amounts in respect of M’s variable profit share. ARC LLP will also be liable to pay employer’s Class 1 NICs. M will not need to complete a tax return for 2014/15 (unless M has other income that needs to be reported through Self Assessment) as M has paid M’s income tax and NICs through PAYE.