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HMRC internal manual

Employment Status Manual

Managed Service Companies (MSC): Application of the NICs rules - partnership annual earnings periods

Where the MSC is a partnership, then Class 2 and Class 4 NICs may be due in addition to any Class 1 NICs in respect of the DEP. This would normally occur if the partnership was a MSC for part of the year because of its relationship with its MSC Provider, but subsequently ceased to be a MSC either because of a changed relationship or changed Service Provider.

Class 4 NICs will only be due if there are any taxable profits remaining after deducting the deemed employment payment. Class 2 NICs will be due even if there are no taxable trading profits. It is important to bear in mind the maximum total Class 2 and employee’s Class 1 NICs in working out the overall NICs liability which should be remitted to HMRC.