New NI rules for partners

From 6 April 2013 all partners will be required to pay NICs, including sleeping and inactive limited partners, reports Harris & Co small business accountants.

HMRC has reviewed its interpretation of the law covering the National Insurance contributions (NICs) liability of sleeping and inactive limited partners and now take the view that Sleeping and inactive limited partners are liable to pay Class 2 NICs because they are “gainfully employed” as self employed earners for the purposes of section 2(1)(b) of the Social Security Contributions and Benefits Act 1992.

Class 2 NICs is a weekly liability which will be due from 6 April 2013 unless a sleeping or inactive limited partner is either under 16, over pension age, is granted the Small Earnings Exception, is a married woman or widow with reduced liability, or claims deferment on account of other employments.

Sleeping and inactive limited partners will need to check their Class 2 NICs position. Sleeping and inactive limited partners who are not already paying Class 2 NICs as a result of being self employed must advise HMRC of their self-employed status and arrange to pay NICs or seek exception/deferment, etc, according to their individual circumstances. Many Sleeping and inactive limited partners will qualify under one of these exceptions but there is a need to ensure that the appropriate action has been taken.