Are your partners and LLP members really employees? Court raises spectre of employee liabilities

16 January 2012 |

The Employment Tribunal found that an individual who had been a member of an LLP (paying tax and NI as a self employed person) should have been regarded as an employee.  The individual in question was originally an employee who later entered into an arrangement where he received a fixed profit share (instead of a salary) and a variable profit share (instead of a bonus).

This is not a tax case, and an employment tribunal has its own specific focus when looking at this status issue.  However, it is likely to have applied the same tests in reaching its decision as would HMRC.  In this case, it is clear that the ET felt that the relationship between the individual and the firm was one of employee/employer due to the control exercised by the firm over how the individual performed his duties.  It also provides some authority for the proposition that agreement by an employee of a firm to be remunerated by way of profit share, does not necessarily make him a member and it could be that HMRC has taken note of this case to use it as a basis for an attack on the self-employed status of members within partnerships and LLPs.


In addition to potential liabilities for employers’ and employees’ National Insurance Contributions and, possibly income tax withholding, partnerships and LLPs will be concerned about potential employment protection liabilities in a worsening economy.

Partnerships and LLPs should satisfy themselves that arrangements for Partners and members are sufficiently robust to withstand any such attack.


United Kingdom Employment Appeal Tribunal

For further information or to discuss any of the issues raised, please contact John Mooney, Guy Abbiss or David Widdowson on +44 20 3051 5711.


Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this article. For further legal information click here.

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