Reply to: LLP Member or Employee?

[Maslins]

Did you get a payslip each month and/or a P60 every year?
Did you get letters from HMRC talking about your self assessment?

One problem you may have is that you'll have been financially better off (due predominantly to lower NIC bills) by being a member rather than employee all these years. You've benefited (knowingly or otherwise) from this perk for 12 years and kept quiet. Now there's something where you'd be better off if you were an employee, and suddenly you're arguing that's what you've always been.

[LisaContractorUmbrella]

I understand what you say, but they did contact me and have suggested that I inform the FCA.

They know now that they too have been lied to and are trying to correct what they can, thankfully they have managed to keep HMRC off me and have already got a significant tax bill reduced.

They know that at some point the IP and HMRC are going to want answers and really have helped so far. Thing is they only prepared the returns based on the information given to them so now I have proven what my earnings actually were it is getting resolved.

It's good that you are being given advice from accountants but I really think that you would be well advised to contact a lawyer that specialises in employment law as the arguments here appear not to be just about tax but also about your employment status - if the firm you worked for have acted incorrectly you may have entitlement to a claim for redundancy - as the firm has collapsed this could be paid for by the Government https://www.gov.uk/your-rights-if-yo...ey-owed-to-you

[stek]

Craig I wish I had more of an idea 12 years ago of what I was getting in to.

All I can hope is that everything is alright, the only peace of mind given to me and my other colleague's is that the IP is not pursuing us but two people in particular who were the designated members.

Lucky only because we have had to work with the IP since this happened.

I used an LLP for a short time and it was the worst thing I ever did - £15k tax bill....

[mogsy]

Craig I wish I had more of an idea 12 years ago of what I was getting in to.

All I can hope is that everything is alright, the only peace of mind given to me and my other colleague's is that the IP is not pursuing us but two people in particular who were the designated members.

Lucky only because we have had to work with the IP since this happened.

[craig1]

Just to let you know I have been lucky enough to have the accountancy firm that dealt with this companies affairs assist me in having HMRC adjust my returns as they had been over declared.

There has been a massive abuse of the LLP system by the designated members so hopefully we can turn this in to a positive by assisting the RPO and IP

From my opinion as someone who uses a LLP as my contracting vehicle, I think LLPs are about as widely misused as the offshore "take home 90%+" things. Too many people see them as easy ways to con the tax man when in reality those operating the system run almost no risk while those people who sign things without reading take all of the risk of HMRC coming knocking with a very large bill.

In a nutshell, if someone offers you a Member's place in a LLP and you don't have in place the most bulletproof contract ever written by any lawyer in the world then laugh at them and walk away.

[mogsy]

I understand what you say, but they did contact me and have suggested that I inform the FCA.

They know now that they too have been lied to and are trying to correct what they can, thankfully they have managed to keep HMRC off me and have already got a significant tax bill reduced.

They know that at some point the IP and HMRC are going to want answers and really have helped so far. Thing is they only prepared the returns based on the information given to them so now I have proven what my earnings actually were it is getting resolved.

[TykeMerc]

If there have been incorrect submissions (if deliberately incorrect that's arguably fraud) then you most definitely need professional advice. You may be advised to be cautious in dealing with the LLP's existing accountants as they have their own stake in this.
Odds are they are perfectly straight and honest over the whole thing, but it's better to be safe than sorry in a situation like this.

[mogsy]

Just to let you know I have been lucky enough to have the accountancy firm that dealt with this companies affairs assist me in having HMRC adjust my returns as they had been over declared.

There has been a massive abuse of the LLP system by the designated members so hopefully we can turn this in to a positive by assisting the RPO and IP

[TykeMerc]

Definitely need advice from a legal professional who understands the ins and outs of LLP's and can ask the right questions, most of us on here are familiar with Ltd companies and tax as it applies to IT type contracting.

[mogsy]

Thanks Craig, you have pretty much summed up what I thought was the case. As there are 7 of us in the same position we have arranged a meeting with a company hat deals with this thing.
The IP and RPO are both sympathetic but also standing there ground on each of our individual cases.

I will let everyone know the outcome of the meeting with a legal professional

[mogsy]

Thanks Northern lad and Stek it was a transport company and we all wore embroidered shirts and ties with company logo

[craig1]

Go to Companies House, search for the LLP, pay the money for a list of members via the Annual Return. If you're listed as a Member then the insolvency practitioner (IP) is right at the first pass but also may be wrong. At some point you must have signed a form that acknowledged that you were a Member and that's been rolled over in their Annual Returns each year.

Many large LLPs such as lawyers or accountancy firms have almost 1/4-1/3 of their fee-earning staff as LLP Members, or Partners. They won't attend any management meetings or anything else you mentioned and most have about as many rights as a middle manager at a typical company.

If you find that you are a member as listed on the last Annual Return then you now need legal advice. Proper advice from a legally qualified professional. Advice from a forum is not enough, you must get this clarified. If you're not going to listen to the advice in this paragraph, stop reading now.

That said, here's my take on it (not as a legally valid opinion or meant for you to use as fact, just my own personal views on the subject):

Here's why I think the IP is both right and wrong: You CAN still be an employee of a LLP while being a Member of that LLP, you could still have the same rights as an employee. You're probably helped by HMRC's new interpretations of employees in LLPs (read here) although coming at it from a completely different angle to how most will! Unfortunately, I think it would take a law suit and court ruling to get the IP to recognise you as an employee as it's only recently that it's been acknowledged that you can be both a Member and employee; I don't think you've a great chance of getting this retrospectively recognised for more than 6 years though as you'll run into legal time limitations. You'd also run into the point that it'll cost you good money to do this as well as time and you may find there's no money in the company for you to claim anyway meaning it could be pointless.

One to be aware of: The veil of incorporation in LLPs is a far thinner one than in Ltd Companies, if there's the first hint of dodgy dealings an IP can seek to reclaim illegally distributed drawings, or your "salary", if the company was insolvent at the time they were made. The more firmly you can get yourself classified as "employee", the harder it would be for them to do so.

Finally, if you gave someone permission to fill your SA in on your behalf and you didn't know what they were putting on it then that's 100% irrelevant, you're still 100% responsible for your SA return if you've delegated it to someone else. If you mean the LLP's SA return then that's one for the Designated Members of the LLP, you're entitled to a copy but that's it in a standard LLP as it's a fairly basic document that ties in reported profit against who it was distributed to. HMRC is fairly intolerant of LLP members who know nothing about how the company they're a Member of operates, they quite rightly say that it's your responsibility to understand what you've signed and what you're responsible for doing. You really need to hope that your name doesn't come out in HMRC's monthly draw to find those lucky people due an audit at any point in the next 6 years or so!

[stek]

What kind of IT role required a uniform?

[northernladuk]

You need legal advice. The musings of a contractor forum isn't really the place for answers. Try an employment lawyer or similar. You need to go in with all guns blazing from the off so get a professional involved first off.

[mogsy]

That's just it, I didn't have a contract but neither was there a partnership agreement.