Salaried Members and AIFMD Deferrals

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Late on Friday 7 March 2014, H M Revenue & Customs (HMRC) issued revised draft legislation in relation to “salaried members” of Limited Liability Partnerships.

The revised draft legislation retains the three tests, all of which have to be met, for an individual member to be treated as a “salaried member” and thereby be taxed on their income as employment income. However, the changes reflected in the further guidance issued on 21 February 2014 have been incorporated including:

  • The term wholly or substantially wholly, which was used in the previous draft legislation, has been replaced by a specific reference to at least 80%; and
  • More detailed rules have been introduced to define both the calculation and timing of capital contributions. It also includes “deemed” capital contributions where an undertaking to make a contribution is in place and the actual contribution is made within two months of becoming a member (3 months is allowed for members at 5 April 2014).
  • The anti-avoidance provisions specifically relating to “LLPs with mixed membership” will come into effect from the date of Royal Assent rather than 6 April 2014. We expect further guidance and draft legislation to be published on or after Budget day, 19 March 2014, when the full impact of the anti-avoidance provisions will be known.


    The meaning of an AIFM firm is yet to be agreed with HMRC and it has also not been confirmed whether only AIFM firms operating remuneration deferral under the AIFMD rules will be able to take advantage of the proposed mechanism, or whether it will be extended to include remuneration rules under the Capital Requirements Directive (CRD).

    In spite of this, the draft legislation issued on 10 December 2013, proposed a new mechanism for dealing with the tax implications of the deferral of members’ remuneration required under the AIFMD. Under these arrangements, the amounts of deferred profits are allocated to the LLP who will receive them as an additional “AIFM Member” and the tax is payable by the LLP at the additional tax rate of 45%.

    HMRC have now issued the form of election required by those LLPs wishing to make use of this mechanism. The election is a single election, not an annual one. Once the election is made, the AIFM Member will be issued with a Unique Taxpayer Reference (UTR) and that member will have to complete an annual self-assessment tax return. This return will have to be filed in paper format. It is not clear at this stage what the submission deadline will be, either 31 October or 31 January following the end of the tax year.

    The first tax year that this will apply will be 2014/15.

    If you have any questions in the meantime please contact any of the following or your usual Throgmorton contact on +44 (0)118 9393200: 

    Neil Oliver

    10 March 2014

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