Bonuses paid after five employees had become LLP members were employment earnings for National Insurance contributions purposes.
The appellant, a limited liability partnership (LLP), carried on business as a retailer. HM Revenue and Customs (HMRC) issued a decision concerning bonus payments paid to five members of the LLP under a ‘long term incentive plan’ (LTIP). The five recipients had all been employees of the appellant prior to becoming members, and they had been admitted to the LTIP while they were employees.
HMRC decided that the payments were subject to Class 1 National Insurance contributions (NICs) as earnings of employed earners. The five recipients were members of the partnership when they received the bonus payments. The profits of an LLP are self-employed earnings in the hands of the members for tax and NICs purposes; however, the bonus entitlements were calculated by reference to profits of the appellant when