Who qualifies as a salaried member of an LLP under the rules applied by section 1273A?

A salaried member is an individual who receives fixed remuneration regardless of the LLP's profits, does not have significant influence over the LLP's affairs, and whose capital contribution is less than 25% of their expected disguised salary. When all three conditions are met, the individual is treated as an employee for tax purposes.

How does section 1273A affect the corporation tax computations of an LLP's corporate members?

When a salaried member's remuneration is re-characterised as an employment cost rather than a partner's profit share, the LLP's corporate members treat that remuneration as a deductible expense when computing taxable profits. This ensures the profits allocated to corporate members properly exclude the salaried member's fixed payments.

Why is alignment between income tax and corporation tax treatment important for LLP salaried members?

Without alignment, an individual could be taxed as an employee under PAYE while corporate members still treated their share as a partner's profit allocation for corporation tax. Section 1273A prevents this mismatch by ensuring amounts paid to salaried members are consistently accounted for as employment costs across both regimes.

Corporation Tax Act 2009 section 1273A

Q: What does section 1273A of the Corporation Tax Act 2009 do?

Section 1273A ensures that where an individual member of a limited liability partnership is treated as a salaried member for income tax purposes, the same employment treatment applies for corporation tax on income. The member is treated as employed under a contract of service, aligning both tax regimes consistently.

Limited liability partnerships: salaried members

Section 1273A ensures that where a member of a limited liability partnership is treated as a salaried member for income tax purposes, the same employment treatment applies for corporation tax purposes.

Applies to individual members of LLPs who meet the conditions for being classified as "salaried members" under the income tax rules
A salaried member is treated as an employee of the LLP under a contract of service, rather than as a true partner, for corporation tax on income purposes
All of the salaried member's rights and duties as a partner are re-characterised as rights and duties under that notional employment contract
This provision mirrors the income tax treatment to ensure consistency across both tax regimes when an LLP has corporate members alongside the salaried individual

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