NIM12005 – Class 1: Calculating NICs for Directors: Fees received by professional partnerships

Regulation 27(1) & Regulation 27(2) SSCR 2001

Fees are liable to Class 1 where received in respect of directorships even if members of a professional partnership, such as solicitors hold them. However regulation 27(1) and (2) SSCR 2001excludes those fees from Class 1 where:

• the director is a partner in a firm carrying on a profession; and
• it is a normal practice of the profession and of the particular practice; and
• the fees have to be paid to the firm under the terms of the partnership; and
• the payment is an insubstantial part of the gross receipts of the firm.

The 1st bullet excludes those professional people practising alone and not in partnership.

In order to qualify under the 2nd bullet, both parts need to be considered. It might be common practice for solicitors to be represented on boards of directors but it might not be normal for the practice.

The 3rd bullet is also a question of fact and in view of its terms, you should normally expect to find the requirement in writing in the partnership agreement.

For advice on “insubstantial”, see NIM12006.