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Employment status and LLPs

Sometimes you come across strange cases whereby tax and employment law diverge – the "limb worker".

The issue in the appeal of Bates van Winklehof v Clyde & Co LLP (1) depended essentially upon the true construction of section 230(3)(b) of the Employment Rights Act 1996 (“the ERA”) and section 4(4) of the Limited Liability Partnerships Act 2000 (“the LLPA”).

Employees enjoy the greatest number of rights, and those who are self-employed the least, with workers in between the two extremes.

Whilst the above case is essentially an employment law matter, it is perhaps useful to keep it in the kit bag when considering tax due diligence around the subjective area of “status”.

This appeal was allowed because the Supreme Court found that the status of a person working for an LLP must now be determined by reference both to the ERA and to the LLPA. Apparently a member of a limited liability partnership shall not be regarded for any purpose as employed by the limited liability partnership unless, if he and other members were partners in a partnership, he would be regarded for that purpose as employed by the partnership.

In summary, the judgement by the Supreme Court confirmed that LLP members who:

• Personally perform services;

• Form an integral part of the LLP’s business;

• Are unable to offer their services to anyone else; and

• In respect of whom the LLP is neither a client nor a customer

...are workers, even if they receive a share of the LLP’s profits. These individuals are therefore entitled to the rights and protections that UK legislation affords to workers.

In my opinion, the tax position is different, but it goes to show that the employment law and tax regimes require careful consideration in their own right.

I am careful to add that my above comments are for general guidance only and to get more information about tax matters you can contact me though my website or directly by e-mail at

(1) Bates van Winklehof v Clyde & Co LLP [2014] UKSC 32