Whistleblowing
In order to manage these risks, IFAs should ensure that they have a whistleblowing policy and procedure in place that is clear to its staff, and that this is applied to all employees, including LLP members, to ensure that such concerns are properly investigated and addressed when raised. Firms wishing to expel LLP members will also need to be alive to the risk of whistleblowing claims. If there is any risk of a whistleblowing claim (or a discrimination claim), they should ensure that the reasons for any business decisions, including with respect to the level of bonuses/discretionary profit share and expulsion or compulsory retirement, are properly documented and do not imply any link between the member having raised regulatory issues or other breaches of legal obligations and their profit share or expulsion.
Firms will also need to consider the wider implications of their members having ‘worker’ status, such as the need to ensure that they receive paid holiday, to give their express agreement to offset monies owing to the LLP or to claw back any share of profits,
part-time members’ rights, permitting members to be accompanied at any hearing regarding any conduct issue or any complaint/grievance and, potentially, pension auto-enrolment.
The commercial drivers and potential tax savings mean that many businesses will continue to benefit from operating as an LLP rather than a limited company or a partnership. LLPs need to tread more carefully to ensure that those benefits are realised.
Jane Amphlett is a partner in the employment team at City law firm HowardKennedyFsi LLP advising financial services organisations
Disguised salary rules for LLPs
1. 80 per cent or more of the member’s remuneration is fixed (including in the initial or final years) or, if variable, without reference to or in practice unaffected by the overall LLP profits (rather than just, for example, by reference to the profits of the member’s division or team).
2. The member has no significant influence over the affairs of the LLP.
3. The member’s contribution to the partnership is less than 25 per cent of the disguised salary.
Key points
* As part of its clampdown on ‘disguised salaries’, HMRC introduced new rules in April 2014 to reverse the presumption that for tax purposes LLP members are self-employed.
* Many LLPs were forced to require their partners to increase their capital contributions.
* IFAs should ensure that they have a whistleblowing policy and procedure in place that is clear to its staff, and that this is applied to all employees.
