Salaried partners – employed or not?

The recent case of Williamson & Soden Solicitors v Briars seems to cast some uncertainty on the employment position of certain salaried partners in partnerships and LLPs.

The key test was whether the relationship between the parties changed at any time after Mr Briars became an employed salaried partner. The conclusion reached was that Mr Briars remained under the control of the equity partners and he did not cease to be employed despite changes to his remuneration so that it included a profit share.

Although the Tribunal did not consider whether Mr Briars had become a partner, the Appeal Tribunal considered this unlikely, despite the profit share, as there was no risk of loss, no management involvement and no supporting paperwork. As we have mentioned in previous articles, these appear to be the key matters to address when partnership is required.

We are not aware of HMRC challenge in this area but a combination of a partner taking a share of business risk and robust paperwork would help rebut a tax challenge.