Parenta Partners LLP information pack

Parenta Partners LLPinformation pack

of 12Parenta Partners LLP information packLast updated: 23/10/19

I have for a long time, thought there must be a better way of aligning my aspirations for Parenta with those of every member of staff.

A way in which we all share success as a team.

A way where everyone’s extra commitment and effort is rewarded.

A way in which we solve our problems collaboratively to enhance the reward for us all.

A way in which we can all thrive together.

That way is to create a partnership, where staff are invited to be partners, rather than employees.

And so, we have established a business structure for Parenta which will enable us to extend the privilege of partnership to all our colleagues, and allow them to share in the profits of the business. If the business makes more money, then everyone wins, if we make less then there is no down side, you still get paid as you always did.

CONTENTS

Introduction 3

Why ‘partnership’ and what is an LLP? 3

How does becoming an LLP impact the business, and more importantly, you? 3

What your new status means 4

Joining an LLP - agreements and forms 4

How profit share works 6

What to expect at tax-return time 7

FAQs 8

Contact information 12


Introduction

The Parenta Partners LLP (Limited Liability Partnership) was formed to create a culture of partnership and participation. It of fers you a unique opportunity to share in the success of the business and will allow you to have a direct impact on the company’s growth and development.

Being a part of the Parenta LLP will provide you with greater visibility of the business and its performance. Where the business’s profit targets are met and exceeded, we will aim to provide you with a profit share, which will be in addition to your salary or any commission or bonus that you earn ( if relevant to your role). Our aim is to build an inclusive culture, where there is less hierarchy and more collaboration across all areas of the business, and to ensure that everyone wins when the business is more successful.

Why ‘partnership’ and what is an LLP?

Partnerships have long been recognised as effective business models where everyone is working towards a common goal. You will know of some famous ones, such as the John Lewis Partnership.

Like at John Lewis, the pay of all our LLP members will be linked to our success. You will receive exactly the same money as you always have done, but now, in addition, LLP members will also share in the success of the business. So, every time we increase our profitability through increased sales, operational efficiencies or cost reductions, everybody gains. It’s a win/win.

As LLP members, it becomes everybody’s responsibility to solve whatever problems we have and to ensure, between us, we deliver a remarkable experience for our customers.

How does becoming an LLP impact the business, and more importantly, you?

It’s no secret that adding the LLP structure into our company has led to a number of advantages and cost savings. By becoming an LLP, Parenta has been able to boost overall earnings, reinvest profits into its daily operations AND support our wonderful people by paying out a profit share when we have exceeded our targets.

We recognise that everyone works hard to make Parenta sing and dance and without any one of our departments, we know our business wouldn’t be the success that it is today. For that reason we have developed a profit share scheme for all of our members to benefit from.

Each and every one of you has something different and valuable to offer Parenta that is more than your time and experience. The LLP spirit encourages and strives for more transparency, engagement and inclusiveness in the

form of LLP members contributing ideas, in decision making and in problem solving.

The LLP opens a door that goes behind the scenes of Parenta, creating transparency for our colleagues. Colleagues will receive quarterly business performance updates and LLP members will be able to

attend quarterly LLP meetings with their committee representatives to propose their ideas, share concerns and make suggestions for how the business can operate more efficiently and effectively

– after all, this stuff impacts your profit share directly.


What your new status means

Upon joining the LLP, your tax status will change. No longer will you be an employee of the company, now you will be a partner in the company, which enables you to share in the profits. As a partner, you’ll be self-employed for tax purposes.

Being self-employed whilst still being able to benefit from an “employed status” is uncommon yes, but it certainly has its benefits. As an LLP member you are self-employed for tax purposes, however, for contractual and statutory purposes, Parenta still provides you with the same benefits that you would receive if you were employed. This means you:

• Continue to be paid exactly the same net amount by Parenta on a monthly basis;

• Continue to receive a normal payslip in exactly the same way as you do now;

• Continue to receive statutory rights and benefits on a contractual basis (subject to meeting the eligibility criteria) i.e. sick pay, family leave (e.g. Maternity, Paternity, Adoption), pension etc; and

• Continue to benefit from all terms and conditions of your Parenta Training/Group employment contract.

As a self-employed person for tax purposes, you will need to return an annual self-assessment for each tax year.However, the work involved on your part will be very limited as our LLP advisors ‘Optimal Compliance’ will complete your self-assessments through their online self-assessment tool. They will also make themselves available to you for any tax related queries, even if it is something not LLP related!

Your new status means that any taxable amount payable on company benefits ( i.e. Private Health Insurance and Company Cars) will be absorbed by the business.

Joining an LLP - agreements and forms

As a new member of an LLP you will need to sign a few agreements and forms which all serve different purposes in joining the Partnership and allowing your tax affairs to be kept in order.

We aim to make this process as straight forward as possible for new members as we appreciate that it can be challenging for those that have never been in a partnership before.

Note that the effect of the new Agreements for joining the LLP is to preserve your pre-existing employment termsand remuneration with the addition of a profit share based on business performance.

Members’ Agreement / Deed of Adherence (DoA)The Deed of Adherence is an agreement between you and the Partnership which you sign on joining thePartnership. It sets out the terms under which you will be a member of the Partnership with your personal details including your Capital Contribution (see below) to the Partnership. It is the means by which you ‘sign up’ to the LLP Members’ Agreement which sets out the ‘constitution’ of the LLP applicable to all Members. A copy of the Members’ Agreement will be provided to you.

Variation and Settlement AgreementThe Variation and Settlement Agreement reflects the switch from your existing employment terms to joining thePartnership. It is the counterpart to the Deed of Adherence and provides for a capital sum as compensation payable on the change of employment status. The compensation is not paid directly to you but is used to fund your Capital Contribution (see below).


Capital ContributionIn order to comply with the regulatory and commercial requirements for Membership of the LLP you are required, under the Members’ Agreement and Deed of Adherence, to make a Capital Contribution to the funds of the LLP. This is typically an amount of up to £30k. It is important to note that your Capital Contribution is not paid in cash.Instead, it will be funded through the amounts you are awarded under the Agreements referred to above. No cash will change hands when you sign the following Agreements:

• Variation and Settlement Agreement; and

• Deed of Adherence

Form SA401 - Registering a partner for Self-Assessment and Class 2 NICsBeing a member of a partnership means having to complete a Personal Tax return each year. This task is something that Optimal Compliance take care of on your behalf. Form SA401 lets HMRC know you will be completing a personal tax return and pay Class 2 National Insurance Contributions, ensuring you remain entitled to the full range of State Benefits. Note that under the Members Agreement all Personal Tax including NICs relating to your Membership of the LLP are deducted and paid on your behalf by the LLP.

Form 64-8 - Authorising your agentThis form allows Optimal Compliance to act on your behalf as your agent and manage your tax affairs with HMRC. It means that we can complete and submit your annual Personal Tax Return for you.

As an LLP member, HMRC will write you to a couple of times a year to remind you to submit your tax return. This is completely normal. You do not need to do anything about this notice, as Optimal Compliance will do it all for you.

How profit share works

Profit share is activated when the business achieves higher levels of profitability than the preceding financial year. LLP members will be provided with a high level view of the results quarterly to check the progress of the business and the likelihood of profit share being achieved.

The profit share works in the following way; If we increase the profit from one year to the next, then we share the dif ference between the two years.


What to expect at tax-return time

We understand that completing a tax return might be a new experience for some people and therefore might cause a little concern. Please do not worry as our LLP Advisors and the HR team are in place to support you through the entire process.

• The first stage will take place in October / November time each year. Every LLP member will be sent an email link where they will be taken through a step by step questionnaire which will gather all the information needed to complete each tax return.

• You should be careful to include all information about your income and benefits or, any supplementary income you may have, whether this is in your current role or a previous role in the same tax year.

• Optimal Compliance will draft the tax return based on this information and send it to each individual to approve before submitting to HMRC,

• All submissions to HMRC must be made before 31 January and confirmation email sent to each member once submitted, so please ensure you have prepared all your paperwork to assist Optimal Compliance and answer any questions they may have promptly.

If HMRC calculate that tax is due in relation to your role with Parenta LLP then this will be paid by the LLP on behalf of each member. Any tax that is due as a result of income from outside of Parenta is payable by and is the liability of the individual.

You should also provide your bank details in case tax refunds are due (woohoo!) All tax refunds are paid by HMRC and usually issued in March/April time.

Finally, if you do leave Parenta at any point, you will need to maintain personal contact with OC if they leave the business, for whatever reason, so that should tax returns in the following year or any questions arise all administration can be dealt with efficiently and effectively.


FAQs

1. How do I benefit from joining the LLP? You will have the status of “partner”, in the business, we also refer to colleagues that are part of the LLP as members. There will be increased transparency regarding business performance and quarterly meetings with representative LLP members will be held. All LLP members are actively encouraged to participate in and contribute to the business as a whole. You will be entitled to a share of any “normalised” profits and will therefore share in the financial success of the business. Whilst the opportunity to join the LLP is not compulsory the business will thrive from the financial benefits the “partnership model” offers and this will, in turn, benefit the LLP members through their profit shares and through the increased opportunities and investments afforded within the business.

2. I am currently in the process of a mortgage application, would I have to inform the Mortgage Company if I decided to sign up to the LLP? I do not want my mortgage application delayed or fall through and would not sign if this would put my application at risk. The way that the LLP model works means that for the member, LLP membership is no different than being a PAYE employee. OC regularly support many LLP Members through the mortgage application process. All they ask is that you liaise with them to ensure the correct boxes are ticked.

3. Do I get proof every year that my tax return has been completed correctly? Yes, OC will provide this.

4. Please explain how we are considered self-employed only for tax purposes and in no other way? The way that “partnerships” are taxed has always been on a “self-employed” basis and LLPs are treated in the same way. However, LLPs are a new construct (they were launched in 2001) and the law is rapidly evolving in the direction of treating LLP Members as employees for all other purposes. For example, the “Whistle Blowing Protections” (Supreme Court decision in 2014) and Pensions Auto-Enrolment have ruled to treat LLP members in the exact same way as employees. Furthermore, we have ensured that all employee rights are preserved and in the LLP Members Agreement.

5. So who actually pays the Tax if we are considered self-employed? Parenta Partners LLP takes full responsibility for paying all of the tax owed by you relating to your employment with Parenta. If you have any tax liabilities from income received outside of Parenta then this is your liability and responsibility to pay.

6. I have only been with the company a few months, would I still have the same rights as people who have worked here from the start? You will have the exact same rights as you would have as an employee of the existing company. Others who have worked for the company for longer will have their comparable rights preserved too. No one will be worse off and everyone will be better off due to the profit share and other potential benefits.

7. From an employee’s perspective, what are the downsides of signing for an LLP except for the tax return? None - the only downside is an added admin burden, most of which OC carry out for you. Note that there is a benefit in that OC will help you (almost always without charge) with any personal tax and financial queries for you and your family members on a confidential basis.

8. Is there any liability to me personally for being a member of the LLP? No, LLP stands for Limited Liability Partnership, this means your total liability is limited to the investment you make in the Partnership in the first place.


9. So, I need to make an investment into the LLP? No, Parenta will make an investment on your behalf. This is called a “capital contribution” and is roughly equal to 25% of your annual salary. This is needed to ensure that you have “capital” in the partnership business.

10. What paperwork will I have to agree to? Unfortunately, there’s quite a bit, and it’s a little complicated. The good news, though, is it will all be prepared for you. Deed of Adherence This is an agreement between you and Parenta Partners LLP which you sign on joining the Partnership. It sets out the terms under which you will be a member of the partnership with your personal details including your Capital contribution. This is the means by which you “sign-up” to the LLP Members Agreement which sets out the “constitution” of the LLP applicable to all Members. A copy of that Constitution will be sent to you in due course. Variation and Settlement Agreement The Variation and Settlement Agreement reflects the switch from your existing employment terms to joining the Partnership. It is the counterpart to the Deed of Adherence and provides for a capital sum as “compensation” payable on the change of employment status, the compensation is not paid directly to you but is used to fund your capital contribution. Form SA401 As discussed above, being a member of a partnership means having to complete a Personal Tax return each year. This will be done for you by OC. Form SA401 lets HMRC know that you need to complete a Personal Tax return. Remember, that under the Members Agreement all personal Tax, including National Insurance contributions are paid on your behalf by the LLP. Form 64-8 This form allows OC to act on your behalf as your agent and manage your tax affairs with HMRC. It means they can complete and submit your annual Personal Tax return for you.

11. Would there ever be any request for a personal contribution to the business? No, that is the whole point of the Limited Liability Partnership.

12. Would we be held responsible if the business goes bust? No. Only the Designated Members have this responsibility - the equivalent of LTD Company Directors.

13. If there is no profit to share, would we still get a profit share and would we be expected to make contributions? If there is no profit you will still be entitled to your monthly pay as usual, but there is no additional profit share if there is no profit. Under no circumstances can you be required to make a contribution.

14. Do all staff members have to sign for the company to become an LLP? No, it is by invitation only and is intended as a privilege which confers enhanced status. It is not by any means compulsory to join. Think of it as a promotion which you do not have to accept.

15. Will there be repercussions if staff members did not sign the LLP? No, any team members not joining the LLP now will continue as they are. They will not be entitled to the profit share while they are not LLP Members. They may be offered the opportunity to join later if they don’t accept now.


16. If we are classed as self-employed for tax purposes and we claim expenses shouldn’t this reduce our tax and not the company’s? The structure is designed to accrue any tax benefits to the business so as to help increase overall profits which will, in turn, be distributed to the partners. Some LLPs offer a direct immediate incentive to partners to encourage them to prepare details of eligible expenses even though the tax benefit may not crystallise for over a year. However, you will definitely benefit one way or the other from being able to offset certain additional expenses.

17. What is the protocol for leaving the company as part of the LLP? Leaving the business is exactly the same process as for an employee with the same notice period, etc. The only difference is that you would need to keep in touch with OC to ensure your tax returns are completed correctly after you have left. You will not be issued with a P45 when you leave. Instead you should ask your new employer for a ‘Starter Checklist’ and select box B in the ‘Employee statement’ section.

18. The company is promising that there will be the funds set aside to cover all the income tax/ NI liabilities that an individual is due to pay. How is this guaranteed? As part of the membership agreement, the LLP is liable for any tax due by members during their time at the LLP. The designated members will be responsible for ensuring that any tax / NI liabilities are paid when due on behalf of all other LLP Members, in much the same way as they are responsible for collecting and paying your current PAYE taxes.

19. If I am given more responsibilities does my role in the company change and if so is this reflected in my pay? The ethos behind LLP Membership is to encourage collaborative team working through a sense of shared responsibility for, and a greater stake in, the business and its profits. While your sense of overall responsibility should increase, your day to day responsibilities in the business are not affected by becoming a partner in the LLP.

20. Please explain how the LLP would affect the following: Holiday pay/ entitlement; charge of contracted hours; change of pay; redundancy; overtime; sickness; entitlement/pay; maternity / paternity entitlement/pay, other State Benefits? All of the above are exactly the same as now apart from the enhanced profit share. The key point is that this is designed as an “upside only” opportunity. The LLP pays Optimal Compliance to do all the hard work in the background to ensure it delivers efficiencies both culturally and financially to the business to make it affordable and to ensure there is more profit to distribute to everyone in the team.

21. Will I get a payslip and how will I be paid? You will receive a monthly LLP drawings statement showing your income and you will continue to be paid on exactly the same day each month, at exactly the same amount as normal.

22. When will tax Self-Assessments take place? Self-Assessments are completed based on the standard tax year, which is the period from 6 April to the following 5 April. Self- Assessments are not due for submission until January 31st however Optimal Compliance plan to complete these ahead of this date, and will aim to have them completed by the end of December.

23. How will Self-Assessments take place? They will be processed through an online software platform that Optimal Compliance uses to process Self-Assessments. Around October / November time, you will receive a link from Optimal Compliance to log in and review your Self-Assessment details that will have already been pre-populated for you. You will need to review these details and add in any missing information ( i.e. additional income) before submitting. This information will go back to Optimal Compliance for final review before being submitted to HMRC.


24. I have been asked about a UTR, what is this? A UTR (Unique Taxpayer Reference) number is a 10 digit number assigned by HMRC that is unique to you and you’ll be presented with one when you register for self-employment via completion of form SA401.

25. When should I expect to receive my UTR (Unique Tax Reference)? UTR’s are usually received between 6-8 weeks after the paperwork has been sent to HMRC. At the point of starting Self-Assessments, Optimal Compliance will chase any that are missing.

26. If I have already been self–employed, can I use the UTR I have been issued previously? Yes, a UTR is yours for life! If you already have a UTR, please tell the HR Department.

27. What can we claim back through the self-assessment process? This process is currently being reviewed to ensure that it is cost effective and therefore maximises the members’ potential profit share. To ensure that it is implemented in the most efficient manner which will benefit all members, a survey will be distributed to understand the scale of eligible expenses. Any expenses collated by members will be off set against profits in the LLP which will reduce the LLP’s tax liability. This will result in an overall saving for the business, and it is intended that some of this saving is shared with the members. Before this occurs, it needs to be confirmed that the benefits of processing the expenses is greater than the administrative expenses to the LLP, as if not, it could adversely impact the profit share.

28. The personal tax allowance for 2019/20 is £12,500, will this benefit members? Yes, absolutely. Members’ net pay will be adjusted to account for updated tax allowances.

29. If we have not paid the right amount of tax for the year, who is liable? Contractually the liability is with the business. This is only relevant where the tax underpayment has happened whilst contracted under the LLP.

30. Tax codes were originally generated at the beginning of the year to recover the payable tax on healthcare insurance premiums. If members have continued to pay for this tax after transferring to the LLP, can this be claimed back? At the point of the Self-Assessment, which will take place circa November, OC will complete two tax calculations - one calculation for your tenure with the LLP and the other for the time in which you were employed. They will then review the results from both to identify whether there is any refund due. If a refund is due for tax overpayments in connection with medical insurance, this will come back to you directly from the LLP.

31. How does the profit share work? As members of the LLP, you will be entitled to a share of the profit which will be dependent upon the levels of profitability the business achieves. The business needs to attain the required level of profits for the profit share to occur. To allow greater transparency over this process, we are currently reviewing how this information is to be communicated to our members and a process is being developed to provide you with the relevant information. This financial information will be communicated quarterly with the final communication occurring at the latest end of May to ensure the financial results have been finalised. The semi-annual communication will allow members to have a greater understanding of the company’s performance and provide further clarity. If the required level of profit has been achieved, then LLP members will receive an additional payment payable in the May payroll. This payment will be pro-rata dependant on the number of months the member has been in the LLP and will be subject to normal deductions.


32. Have we achieved our targets and if we have, when are we likely to receive any payment of profit share? The profit share results will be published after year end has been completed. We will be able to confirm this circa end of May time. If there is a payment to be made, it is likely (but not certain) this will be paid in May’s payroll.

33. What about pensions? You will be auto-enrolled into the business pension scheme after three months of service. In terms of the state pension, your NI contributions will ensure you are eligible to receive the same amount that you would receive if you were making contributions as an employee.

Contact information

Any further questionsWe encourage you to get in contact with someone in the HR team in the first instance with any questions you might have. Alternatively for more in-depth questions please do contact Optimal Compliance directly, they are all friendly and approachable, they understand people feel a little unsure about the process and believe there is no such thing as a silly question. They do what they do because they love helping businesses and people to grow and achieve their full potential.

Your main contacts are:

Hugo Saunders

020 3326 0133

[email protected]

Ben Crampin

078 8411 7231

[email protected]

Please also visit our website at www.optimalcompliance.com for more information and our latest blog articles.

http://www.optimalcompliance.com

0800 002 9242 [email protected]

www.parenta.com

Parenta, 2-8 London Road, Rocky Hill, Maidstone, Kent, ME16 8PZ, Reg No 05249690

Working together for our children

Updated: 23/10/19

Parenta Partners LLP information pack

Documents

Transcript of Parenta Partners LLP information pack