News: January 2014

LLPs and RTI

Members of limited liability partnerships (LLPs)

LLPs have become increasingly popular as a vehicle for carrying on a wide variety of businesses, although running a business as a limited company may well be the norm once corporation tax rates go down to 20% whatever the level of taxable profits.

An LLP combines limited liability for its members with the tax treatment of a traditional partnership. Individual members are deemed to be self-employed and are taxed as such on their respective profit shares as if they were carrying on a notional sole trade.

It has now been decided that deemed self-employed status is not appropriate in some cases. For example, individuals who would normally be regarded as employees in high-salaried professional areas such as the legal and financial services sectors are benefitting from self-employed status for tax purposes which leads to a loss of employment taxes payable.

The legislation may be amended (probably with effect from 6 April 2014) by simply removing the provision which deems individual members to be self-employed. This would mean applying the normal employment v self-employment tests. A consultation document proposed additional tests which may be easier to apply in certain scenarios.

Real time information (RTI) late filing and late payment penalties

A new penalty regime for RTI comes in from 6 April 2014, to encourage compliance with the information and payment obligations.

Late filing penalties will apply to each PAYE scheme, with the size of the penalty based on the number of employees in the scheme. Monthly penalties of between £100 and £400 will apply to micro, small, medium and large employers.

Each scheme will be subject to only one late filing penalty each month regardless of the number of returns due in the month. There will be one unpenalised default each year with all subsequent defaults attracting a penalty. Penalties will be charged quarterly and subject to the usual reasonable excuse and appeal provisions.

There are several relaxations in this unpleasant penalty regime, and we can advise by reference to your particular circumstances.

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