Personal Tax Newsletter – July 2024

As we head towards the General election and the summer holidays, here are some key points around the tax before you go.

This is your annual reminder to check if you need to make a 31 July payment on account to HMRC.

If you are unsure about your payment status or are struggling to pay, please get in touch with your tax advisor, who can check your position and provide assistance.

Also remember, if you believe your tax liability for the year ended 5 April 2024 might be lower than that for 2023, there may be an opportunity to reduce the amount payable by 31 July. So, it might be worth getting your tax return prepared in the next few weeks so your advisor can review your tax position.

At any point, those in the self-assessment regime may be selected for an HMRC enquiry for various reasons. These enquiries can in some case be a lengthy and stressful process to deal with.

What We Can Do to Help:

  • Guidance and Explanation: We can talk you through the enquiry process, explain what will be required, and discuss possible outcomes.
  • Liaison with HMRC: We will liaise with HMRC on your behalf, manage all correspondence and communication, and verify the accuracy of your tax position.
  • Penalty Mitigation: We can help mitigate penalties where possible and negotiate with HMRC on any additional tax that may be due.

This service is not restricted to our current clients. If you have been preparing your own tax returns and have received an enquiry notice, we can assist you through the process from start to finish.

HMRC have updated the salaried member rules following their case with BlueCrest Capital Management (UK) LLP.

The salaried member rules evaluate the work and payment arrangements of each LLP member against three conditions. Effectively, they help determine if an LLP member should be taxed as an employee or as being self-employed.

Most LLPs want their members to be classed as self-employed rather than employees, so it is important for firms and members to annually consider if they are still being compliant with the rules in a way that produces the desired outcome.

What are the rules?

There are three conditions to be considered.

If all three conditions are met, the individual member is classified as an employee and taxed accordingly under PAYE rules. However, if at least one condition is not met, the individual is regarded as self-employed and is taxed through the self-assessment system.

Condition A:  It is reasonable to expect that at least 80% of the total amount payable to the member, in respect of their performance will be a fixed “disguised salary” amount. This means that it will not vary depending on the overall profit of the LLP for the year.

Condition B: The individual does not have significant influence over the affairs of the LLP. This is a difficult condition to consider and what is significant influence will vary between firms. The BlueCrest case highlights the importance of being able to evidence how key business decisions are made and who is responsible for making them.  HMRC’s guidance now outlines that merely being able to vote, or to express a view is unlikely to constitute significant influence.

Condition C: is met if an individual’s capital contribution to the LLP is less than 25% of their disguised salary. When reviewing this condition, consideration needs to be given to matters such as the timing of a contribution being made, and increased contributions should not be directly linked to any changes to their fixed salary.

Navigating Compliance

It’s essential to remember that these conditions are tested independently of each other, and there’s no requirement that they must be tested simultaneously. However, it’s prudent to consider all conditions in light of HMRC’s revised guidance post-BlueCrest case to ensure your tax position remains as expected.

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