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HMRC internal manual

Employment Status Manual

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HM Revenue & Customs
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Application of the NICs rules: annual earnings periods

Regulation 8(2) SI 2000 No. 727Where the intermediary is a partnership then Class 2 and Class 4 NICs may be due, in addition to any Class 1 NICs in respect of the deemed payment.

Class 4 NICs will only be due if there are any taxable Trading Income profits remaining after deducting the deemed payment.

Class 2 NICs will be due even if there are no taxable Trading Income profits.

It is important to bear in mind the maximum total Class 2 and employee’s Class 1 NICs in working out the overall liability.

The amount of Class 1 NICs due on the deemed payment is calculated using an annual earnings period, irrespective of the fact that the partners are not directors. See example ESM3232.