Background  

The salaried member rules have informed the way professional partnerships remunerate fixed share partners for many years. They were introduced to tackle ‘disguised employment’ through LLPs where members of the LLP provided services on terms similar to employees. The rules are based around three conditions: A, B & C. For the rules to apply to a member of a LLP, the member must fail all three conditions. The rules contain a number of targeted anti-avoidance provisions.  

In February 2024, HMRC updated its guidance on the rules to take a tougher stance on capital top-up arrangements. The updated guidance included a clear statement that top-ups made to avoid the application of condition C would trigger an anti-avoidance provision. Condition C is that the individual’s capital contribution to the LLP is less than 25% of their ‘disguised salary’. Many LLPs used periodic top ups to ensure that their members’ contributed capital remained above the 25% of disguised salary threshold so this shift was a significant cause for concern.  

To learn more about condition C and the anti-avoidance rule, read the article we published in August 2024. 

April 2025 changes 

Having listened to ICAEW and others, HMRC amended its guidance earlier this month. HMRC's guidance now confirms that genuine capital contributions which give rise to “real risk” will not trigger the anti-avoidance provision, even when made as part of top-up arrangements.  

The updated guidance also provides clarity on a number of points at PM259200: 

• ‘real risk’ is intended to capture situations where the capital contributions will endure and the partner is at risk of losing that capital in the event that the LLP becomes insolvent; 
• the contributed capital must be genuinely available to the LLP (not ring-fenced in any way for the benefit of members);
• the fact that an LLP is well-capitalised has no bearing on whether the contribution is genuine or under ‘real risk’; and
• references to the anti-avoidance provision being triggered where “any arrangements in place have a main purpose of preventing the individual being a salaried member” have been removed.

Other recent developments 

Members of an LLP may also need to consider Condition B, ie, whether they exert ‘significant influence’ over the affairs of the LLP. The term ‘significant influence’ is not defined and has been subject to a lengthy debate in the courts. The Court of Appeal found in favour of HMRC in the case of HMRC v Bluecrest Capital Management (UK) LLP [2025] EWCA Civ 23, taking a narrower view of the meaning of “significant influence” than either the First-tier Tribunal or the Upper Tribunal.  

The Court of Appeal judgment is firm in that only influence deriving from the legally enforceable rights and duties of the members is to be taken into account in assessing whether partners have ‘significant influence.’ However, both tribunals had decided that significant influence did not solely relate to managerial influence and can relate to financial and other influence. It is understood that BlueCrest has sought permission to appeal to the Supreme Court but until the case is heard again, the impact of condition B is likely to be uncertain.  

The Tax Faculty will continue to work closely with members and HM Treasury on changes in this area.