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»Ê¹ÚÌåÓýapp partnership, as an employer, will be liable to secondary Class 1 NICs on employeesâ€� salaries. No secondary class 1 NICs will be due on profits allocated to partners, as they are not employees and so do not receive employment income. It is becoming more common for businesses previously carried on as companies to be carried on through Limited Liability Partnerships, in particular. »Ê¹ÚÌåÓýapp individuals who would have been directors or other senior employees are, instead, members of the LLP. »Ê¹ÚÌåÓýapp Class 1 NIC savings arising from operating through an LLP structure, as opposed to a company, can be significant. Similarly, it has been common for general partnerships converting to LLPs to transfer ‘salaried partnersâ€� (who were actually employees) to actual partner status.

A business is free to operate through a company or a partnership (including an LLP) and HMRC accepts that, in the case of genuine partners, amounts allocated to them will not attract Class 1 NICs as they represent a profit share, and not earnings. However, you should pay careful attention to cases where it is claimed that individuals who, in reality, enjoy no rights of being a partner are treated as partners, purely so that the employer Class 1 NIC liability can be avoided.