ESM3575 - Managed Service Companies (MSC): Application of the NICs rules - partnership annual earnings periods

Where the MSC is a partnership, then Class 2 and Class 4 NICs may be due in addition to any Class 1 NICs in respect of the DEP. This would normally occur if the partnership was an MSC for part of the year because of its relationship with its MSC Provider, but subsequently ceased to be an MSC either because of a changed relationship or changed Service Provider.

Class 4 NICs will only be due if there are any taxable profits remaining after deducting the deemed employment payment. Class 2 NICs will be due even if there are no taxable trading profits. It is important to bear in mind the maximum total Class 2 and employee’s Class 1 NICs in working out the overall NICs liability which should be remitted to HMRC.