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HMRC internal manual

National Insurance Manual

NIM12005 - Class 1: Calculating NICs for Directors: Fees received by professional partnerships

Regulation 27(1) & Regulation 27(2) SSCR 2001

Fees are liable to Class 1 where received in respect of directorships even if membersof a professional partnership, such as solicitors hold them. However regulation 27(1) and(2) SSCR 2001excludes those fees from Class 1 where:

  • the director is a partner in a firm carrying on a profession; and
  • it is a normal practice of the profession and of the particular practice; and
  • the fees have to be paid to the firm under the terms of the partnership; and
  • the payment is an insubstantial part of the gross receipts of the firm.

The 1st bullet excludes those professional people practising alone and not inpartnership.

In order to qualify under the 2nd bullet, both parts need to be considered. It might becommon practice for solicitors to be represented on boards of directors but it might notbe normal for the practice.

The 3rd bullet is also a question of fact and in view of its terms, you should normallyexpect to find the requirement in writing in the partnership agreement.

For advice on “insubstantial”, see NIM12006.