I have just been trying to find out if a client of mine needs to change his status with HMRC, and also stop paying class 2 NI.
Until recently the individual was a working partner in a family partnership. He has now taken up full time employment but has left a small amount of capital in the partnership, and remains a silent partner (ie taking no active part in the running of the partnership). He will not be taking any salary, or profits from the partnership
Having trawled through HMRC, he seems to fall outside their definition of Self Employed, as he is not carrying on a trade, profession, or vocation. He also falls into their defintion of a Silent Partner. However there does not appear to be any guidelines on what needs to be done. Should he inform them he is no longer self employed, and therefore should not pay class 2 NI. As a partner, I am guessing that even though he will not be taking any profit, he will still have to complete a SA return.
I think you should write to HMRC saying that your client is no longer self employed, although still a partner int he partnership. His class 2 NI liability should stop, although I was expect (as you do) that he would still receive tax returns.
I guess the alternatives are either claiming the small earnings exemption each year, or remove him completely from the partnership (and repay his capital), although there are obviously legitimate reasons for him to remain a partner.
