Pamela Sayers looks at a recent case concerning whether a partner had employment or partner status for tax purposes.
A recent case heard in the Employment Appeal Tribunal (EAT), which upheld the decision of the Employment Tribunal, has provided welcome relief for LLPs with fixed share equity partners.
In Tiffin v Lester Aldridge LLP, Tiffin who, although a fixed share equity partner, considered himself to be an employee rather than self-employed and wanted to seek compensation for unfair dismissal. The EAT dismissed the case, satisfying LLPs that individuals who enter into members' agreements cannot seek claims in employment tribunals.
However, partnership agreements should be reviewed as the EAT considered Tiffin to be a partner because he:
- made a capital contribution to the LLP
- was entitled to a profit share
- had a say in the management of the firm
- would share in the LLP's surplus assets of the firm on a winding up.
The degree of these did not seem to matter (for example, Tiffin received a very small profit share) and no emphasis was placed on any one of these criteria. However, in the case of Williamson & Soden Solicitors v Briars, the EAT held that the fact that someone receives a share of the profits will not, in itself, point to partnership status. But it should be noted that in the case of Williamson, not much had changed for the individual when he moved from being an employee to a member of the LLP.
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