Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
, see all updates

Class 4 NICs: who is liable: sleeping partners - liability to pay Class 2 and 4 NICs from the 2013 to 2014 tax year

Social Security Contributions and Benefits Act 1992 Section 2(1)(b) and section 15

HMRC has reviewed its interpretation of the law and now considers that sleeping partners are, and should always have been, treated as gainfully employed for the purposes of section 2(1)(b) of the Social Security Contributions and Benefits Act 1992 because:

  • “employment” as defined in section 122 of the Social Security Contributions and Benefits Act 1992 includes business and section 1(1) of the Partnership Act 1890 provides that “Partnership is the relation which subsists between persons carrying on a business in common with a view of profit”; and
  • section 2(1)(b) of the Social Security Contributions and Benefits Act 1992 imposes no requirement that partners have to be active in the business.

HMRC also considerssleeping partners are, and should always have been, liable to pay Class 4 NICs because:

  • in order for there to be a partnership for the purposes of the Partnership Act 1890, all the partners (whether General or Limited Partners) are “carrying on a business in common with a view of profit”; and
  • section 15 of the Social Security Contributions and Benefits Act 1992 imposes no requirement that partners have to be active in the business.

Class 2 and 4 liabilities will be enforced from the start of the 2013 to 2014 tax year in respect of that year and subsequent tax years.

See NIM24520, NIM24521, NIM24522, NIM24524