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‘Sleeping’ and Inactive Limited Partners Take Note

HM Revenue and Customs (HMRC) have decided that sleeping partners and inactive limited partners are – and have in the past been – liable to pay Class 2 NICs as self-employed earners and Class 4 NICs in respect of their taxable profits.

Class 2 NICs will be due from 6 April 2013, unless a sleeping or inactive limited partner is covered by one of the exemptions.

Sleeping and inactive limited partners should account for Class 4 NICs liability, if any, for the 2013/2014 tax year of assessment and for subsequent tax years.

Those who have not paid Class 2 or Class 4 NICs in the past will not be hit with a demand for a backdated payment. Those who have made payments for past years will not be entitled to any refund of Class 2 NICs or any overpayment relief in respect of Class 4 NICs.

Any sleeping or inactive limited partners who are not already paying Class 2 NICs must advise HMRC according to their individual circumstances, even where they qualify for one of the exceptions.

You can register for Class 2 NICs and self-assessment online at  the HMRC website.

Further guidance in respect of small earnings exception is available here.

Further guidance in respect of deferment is available here.

General guidance in respect of Class 4 NICs.

Contact us for individual advice on this issue.