Following a re-interpretation of the law, HMRC have announced that from 6 April 2013 sleeping partners will be liable to pay National Insurance.
A Sleeping Partner is someone who has a capital share in a Partnership, but takes no active role in the running of the business. These arrangements are not untypical in family owned businesses, or where a trade is being passed from one generation to the next.
If you are affected, you should consider the following:
- Sleeping and inactive limited partners who are not already paying Class 2 NICs will need to register. They can claim for exception from these contributions if their circumstances allow, for instance if their profit share is below the required limit.
- For 2013-14 and subsequent tax years Class 4 contributions will also arise.
- Sleeping partners who have not paid contributions in prior years will not be required to do so. However they may consider making voluntary contributions to improve their accessibility to benefits.
If you have been treated as a sleeping partner up to 5 April 2013 you should take action to register for Class 2 purposes otherwise you run the risk of incurring penalties. Contact our taxation team today for practical help on how these changes will affect you and what can be done to mitigate any adverse affects. Call us on 0845 177 5500 or online