From 6 April 2015 inactive members of Limited Liability Partnerships (LLPs) are liable for Class 2 NICs.

LLP members are treated the same for National Insurance Contributions (NICs) purposes as sleeping partners and inactive limited partners of conventional partnerships.

In general terms, partners, in a partnership are all treated as self-employed and are subject to both Class 2 and Class 4 NICs. LLP members are treated as partners. 

Liability for Class 2 NICs is no longer a determining factor in deciding whether individuals operate through an LLP or a partnership.

Under regulations introduced on 9 March 2015 the meaning of 'employment' for the purposes of Parts 1 and 6 of the Social Security Contributions and Benefits Act 1992, is amended to include membership of an LLP carrying on a trade, profession or business with a view to a profit.

An active LLP member, as a partner is automatically treated as self-employed for tax, as someone carrying on a trade, profession or business with a view to profit, they are also subject to Class 2 and Class 4 NICs on their profits.

There is an exception and this is in cases where the LLP Salaried member rules apply. In those cases, the member is treated as an employee for both tax and NICs.

Useful guides on this topic

Salaried members: When is a partner taxed as an employee?
In some circumstances, LLP members are treated as an employee and subject to Pay As You Earn (PAYE) and National Insurance Contributions (NICs). When does this apply? 

National Insurance: What's the maximum payable?
Where individuals have multiple employments and/or self-employment there is a limit to the National Insurance Contributions (NICs) that are payable. 

External link

Social Security regulations


Small acorn
If you like our content come and join us.

Thousands of accountants and advisers and their clients use www.rossmartin.co.uk as their primary TAX resource.

Register with us now to receive our unique FREE Tax Planning Tips and Advice Guide & our FREE OMB Newsletter.

 

Comments (0)

Rated 0 out of 5 based on 0 voters
There are no comments posted here yet

Leave your comments

  1. Posting comment as a guest.
Rate this post:
Attachments (0 / 3)
Share Your Location

 

Enjoying the Practical Tax content on www.rossmartin.co.uk? 

Sign up now to receive a unique FREE Tax Planning Tips and Advice Guide & our FREE Newsletter.

.Squirrel ad