Monthly Tax Idea – June 2011

A win/win for rewarding key employees

Finding tax efficient ways to reward key employees is always high on the business agenda.

If you currently trade through a limited company, by restructuring to operate fully or partly through a Limited Liability Partnership, significant savings can be achieved for both employer and employee.

A key benefit is 13.8% ongoing annual savings of employer National Insurance Contributions. However, in addition, individual members that join the LLP will also participate and benefit in the future capital growth of the business and will be able to claim entrepreneurs’ relief on their future capital disposals, giving rise to a maximum tax saving of £1.8 million each at current rates. This allows the business to incentivise its key employees in the capital growth in the business without the need for them to have a 5% stake in the ordinary shares and voting rights of the company.

There are some other implications of this planning idea, so it is important you explore these thoroughly in the context of your business and commercial objectives.

For more information contact Lindsay Pentelow or David Boyd.