Income Tax (Trading and Other Income) Act 2005 section 863G

Anti-avoidance

Section 863G sets out anti-avoidance rules designed to prevent individuals and LLPs from using artificial arrangements to circumvent the salaried member rules in section 863A(2), including the use of interposed non-individual entities.

• Any arrangements whose main purpose is to avoid the salaried member rules applying to an individual LLP member must be disregarded when testing whether section 863A(2) applies
• Where an individual who is not an LLP member personally performs services for the LLP through arrangements involving a non-individual member, and the main purpose is to sidestep the salaried member rules, the individual is treated as a salaried member with the income taxed as employment income
• The salaried member rules will not apply to a member if they would only apply as a consequence of arrangements whose main purpose is to avoid the excess profit allocation rules in section 850C
• Arrangements are defined very broadly to include any agreement, understanding, scheme, transaction or series of transactions, whether or not legally enforceable