In February 2024, HMRC changed its guidance on the salaried members rules. This called into question the reliance being placed by many LLPs on their members contributing capital in excess of 25% of an LLP member’s ‘fixed’ compensation. Our 2024 bulletin explains the previous concerns.
The Chartered Institute of Taxation (CIOT) has been in correspondence with HMRC on these matters. On 17 February 2025, CIOT announced that HMRC had released a statement to confirm that the February 2024 guidance changes would, in effect, be reversed.
Obviously the targeted anti-avoidance rules (TAAR) remain relevant, but HMRC has confirmed that “an arrangement which results in a genuine contribution made by the individual to the LLP, intended to be enduring and giving rise to real risk will not trigger the TAAR. This means that a contribution made under a top-up arrangement will not, in HMRC’s view, trigger the TAAR if the arrangement results in a genuine contribution made by the individual to the LLP, intended to be enduring and giving rise to real risk.”
Full details can be found on the CIOT website.
While CM Murray LLP does not advise on tax, we regularly work with LLPs considering these issues as part of their discussion on LLP structure, governance and compensation arrangements. Firms will welcome resolution of the uncertainty presented by the 2024 HMRC guidance changes. This does not mean that firms can reduce their focus on the adequacy of working capital for the business’ long and short term needs or the behaviours that their governance and compensation systems incentivise to achieve the firm’s strategic goals.
If you would like to discuss these issues further or have any questions following the reversal of HMRC’s changes, please contact Partner Corinne Staves.
