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Class 4 NI on foreign partnership share

Class 4 NI on foreign partnership share

A client is UK domiciled and resident. He's a partner in a large US law firm. Like many of these firms, there is a "global" partnership which essentially consolidates worldwide income and produces a US partnership return, and underneath that there is a plethora of national partnerships. So he's a partner in the US firm, and also a partner in the "subsidiary" UK firm. His total income is reported in the US and is taxed there and here (albeit the UK partnership share is deducted thereform to avoid double taxation). On his tax return, his UK partnership page is entered as normal, and the remaining share of profits from the global firm is reported as a foreign partnership.

The question is - is Class 4 due on the non-UK profits as well as the UK profits? I'm getting entirely opposite views from different sources. Section 9.42 of Ray's Partnership Taxation says not, but I can't see the proof of this in the legislation referred to (SSCBA 1992 s15 (1) c). All I can see there is that the liability for Class 4 follows that for income tax. I did see something on the HMRC website saying that Class 4 wasn't due where the the profits arose on a trade or profession where the activities were carried on entirely oveseas. but I can't find it now.

I should mention that he doesn't pay the Class 4 equivalent in the US.

Can anyone help?


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12th Jan 2012 14:01

Section 15, SSCBA 1992

Self-employed contributors pay Class 4 NICs on all profits which are

immediately derived from carrying on or exercising one or more trades, professions or vocationsprofits chargeable to income tax under Chapter 2 of Part 2 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005); and not profits of a trade, profession or vocation carried on wholly outside the UK




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