In the case of a non-active or sleeping partner, although they have the ability to share in the profits or losses of the partnership, their role is restricted. A sleeping partner does not spend personally 10 hours per week on average on activities connected with the partnership trade.
The income of a sleeping partner is considered to be unearned self employed income and this does not count towards the earned income calculation for making pension contributions but more interestingly it does not count towards income for National Insurance Contributions (NIC) purposes.
This fact may be of interest to partners who are inactive in a business but have been taxed and suffered class 4 NIC as if this income was earned income.
Reclaiming tax for a sleeping partner
At Rouse Chartered Accountants our west of London based team of tax advisors can review your tax position to ensure that you are not paying a single penny more tax than you absolutely have to.
A claim for the repayment of the Class 4 NIC can be made for those inactive in a business under certain circumstances and we shall be pleased to discuss this with you. If you feel you or your business partner are inactive in the business please contact our tax team today.
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