If salaried members of LLPs have agreed to increase their capital contribution in order to disapply the new Finance Act 2014 rules, they must pay by 5 July or be treated as employees. 

The Salaried Members LLP provisions apply from 6 April 2014, and LLP members who comply with three specified conditions are treated as employees for tax. If one condition is broken the member is not an employee. The condition which many members chose to break is Condition C:

  • Condition C is met if the member’s contribution to the LLP is less than 25% of the disguised salary which, it is reasonable to expect, will be payable in the tax year for the services the member performs for the LLP. 

To break the condition the member should make an injection of capital into the LLP to bring their contribution up to 25% or more of their salary having given an undertaking prior to 6 April 2014 that the capital would be introduced and then actually introducing capital by 5 July 2014.  

If capital is not introduced on time the member will be treated as an employee from 6 April 2014. 

The contribution rules also apply for new members who must commit on the day they become a member of the LLP, to contribute an appropriate amount of capital; and that contribution must be made within two months of their admission, see Salaried Members LLP provisions