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HMRC internal manual

National Insurance Manual

NIM12004 - Class 1: Calculating Class 1 NICs for Directors: Fees received by professional partnerships and other companies: Introduction

Regulation 27SSCR 2001

Under regulation 27 SSCR 2001, certain directors fees received by members ofprofessional partnerships are excluded from liability to Class 1, see NIM12005. This is to deal with situations where companies mightwant, for example, their legal advisers to attend board meetings as a matter of course andaccordingly a partner in the legal practice is always appointed to be a director.

The regulation refers to members of partnerships so that a sole practitioner is not withinthe regulation and any director’s fees received are liable to Class 1 NICs in thenormal way.

The regulation also excludes directors’ fees from Class 1 contributions where

  • a company has one of its employees or directors as a director of another company, or
  • a company has a right to appoint an individual to be a director of another company (‘nominee director’), and
  • the fees are paid to the first company by the director.

There can still be an exclusion from Class 1 if there is no formal right to appoint adirector to a second company but in those circumstances there is a control test (see NIM12009)

It should be noted that, for example, fees to a director of a Building Society are withinregulation 27, if the other conditions are satisfied, because of the wider definition of“company” for this regulation, regulation 27(5), than that used elsewhere forNational Insurance Contributions.

Regulation 27 is similar to ESC A37 for tax but note that it does not exactly mirror thetax concession.