My clients had a car repair garage, which was owned and operated as a partnership. The partnership owns three rental properties (definitely within the partnership, not personally owned in joint names etc.). Annual accounts to 30 June included both the trading income and the rental income, the latter being added back out on the tax computation and reported as partnership rents. The car repair trade was sold on 20 July 2016, and a long period of accounts was prepared to this date. The garage property wasthen let to the new business proprietors, who now have four rental properties. They didn't use a letting agent previously, and continue to manage all of the properties themselves. Annual accounts for the following year to 20 July 2017 contain just rental income from four properties. The tenants pay for repairs generally, so expenses incurred by the partners are nominal - loan interest, legal fees, accountancy costs and that's about it. My clients are keen to maintain National Insurance contributions (NIC), so which class of NIC should/can they pay? If the partnership still has a 'trade' in the form of property management, does this qualify the partners to pay Class 2/4 NIC? Or do they just have a rental income stream now, with no Class 2/4 NIC income, and so must pay Class 3 NIC voluntarily?

Arthur Weller replies:
If you look at HMRC guidance in its National Insurance manual (www.gov.uk/hmrc-internal-manuals/nationalinsurance-manual/nim23800), you can see that what you have described is unlikely to be subject to Class 2 NIC; and certainly not Class 4 NIC, because that is only payable where income is taxed as trading income. www.gov.uk/hmrcinternal-manuals/national-insurance-manual/nim24505.