Taxation logo taxation mission text

Since 1927 the leading authority on tax law, practice and administration

Readers' Forum - Partners and employees

23 June 2005
Issue: 4013 / Categories:

We deal with the personal tax affairs for a number of clients who are partners in a firm. They receive a salary from the partnership, which is taxed under pay as you earn, in addition to their shares of the partnership profit.

We deal with the personal tax affairs for a number of clients who are partners in a firm. They receive a salary from the partnership, which is taxed under pay as you earn, in addition to their shares of the partnership profit.
In view of this, they pay Class 1 National Insurance contributions on their salary and they also pay Class 2 and Class 4 contributions on their share of the partnership profit. But, in actual fact, the partnership pays the Class 2 liabilities on their behalf. By doing so, the partnership appears in fact to be meeting the personal liabilities of the partners. Should this, therefore, give rise to a taxable benefit? Should the payment of the Class 2 NIC be included in their salary and put through the payroll or should it be entered on the P11D?
Or could one argue that the payment is not being made in their capacity as salaried partners and, therefore, any deemed benefit has not arisen as a result of their employment?
Query T16,631 

Issue: 4013 / Categories:
back to top icon