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Where Taxpayers and Advisers Meet

Self employed/not registered for Class 2 NICs

mackers
Posts: 4
Joined: Tue Jul 23, 2019 6:35 pm

Self employed/not registered for Class 2 NICs

Postby mackers » Tue Jul 23, 2019 6:57 pm

My husband has been self-employed since about 2000. It has just come to light that, although he thought he had been paying the correct NI all this time through his SA, that he has only been paying Class 4 contributions because he was not registered for Class 2. He is currently 58 years old, and has 24 years of full NI contributions, and 10 years ability to contribute until he retires. We just spoke to the NI people on the phone who said we needed to confirm to them the exact date he registered as self-employed in order for them to register him for Class 2. He needs to be registered as Class 2 to increase his pension amount, and we'd like him to repay one extra year so that he can get the full pension. However on his NI record, it says that each year he needs to pay about £780 to qualify for that year, and I don't understand how they come to that figure when Class 2 contributions would be £3 a week, or thereabouts. More importantly, if we tell the NI that he was SA registered from 2000, will they expect him to pay back 19 years of Class 2 payments, or at least for all those years that he earn't above the Class 2 threshold (in the first few years he didn't earn very much)? Advice on this would be much appreciated. Thanks in advance.

robbob
Posts: 2839
Joined: Wed Aug 06, 2008 4:01 pm

Re: Self employed/not registered for Class 2 NICs

Postby robbob » Wed Jul 24, 2019 11:59 am

Hello mackers


You are far from being alone in submitting tax returns for many years declaring self employed profits only to find out that hmrc have not flagged up the class 2NI issue due to the fact the two separate computer systems didn't speak to each other historically and there is still no checking done on their part where there is a mismatch other than the class 2ni unexpectedly being removed from your tax calc - that only helps if you were expecting it in the first place.

from memory hmrc will normally go back approx 6 years and with your agreement bill you for the class 2NI that was mandatory (profits over relevant exception level approx 6k a year.

The rest you would probably need to take up with hmrc and negotiate what works for both parties.

Note you may take the viewpoint that 6 years added to what he has now may be enough if he will secure enough extra years between now and retirement - that may be a good solutution for him if he avoids paying more ni than should have been paid - however it doesnt alter the fact 6 years is still over £1k you may not have been expecting.

Whose fault is it or was it is unknown but hmrc may be able to work that out - it most often happens when someone within sa (capital gains tax / company director / property income) then sets up as self employed - hmrc demand that a start and cessation of sole trader should separately be submitted even if a tax return is generated and i suspect many don't. Or they fill out the wrong form to get within self assessment - eg use the form designed for rental income and the like.
It could also be an hmrc error - all it would take potentially is a couple of weeks employment allowance / jobseekers or a class 2ni query for them to incorrectly mark the person as no longer trading despite the tax returns being submitted confirming this is not the case.

mackers
Posts: 4
Joined: Tue Jul 23, 2019 6:35 pm

Re: Self employed/not registered for Class 2 NICs

Postby mackers » Wed Jul 24, 2019 1:19 pm

Many thanks for your reply. Hopefully they will only go back 6 years and at least he would then accrue NI credits.
He wasn't registered for self-assessment prior to becoming self-employed, so I'm not sure who caused the error.
Anyway hoping to get it sorted out at not too much expense! Thanks again.

Jerome_Lane
Posts: 16
Joined: Mon Jul 22, 2019 10:13 am
Location: Camberley, Surrey
Contact:

Re: Self employed/not registered for Class 2 NICs

Postby Jerome_Lane » Wed Jul 24, 2019 2:21 pm

Robbob is correct in that the NIC office should only look to recover 6 years of class 2 NIC. HMRC have had all the information to raise the class 2 assessment so there's no question of avoidance so they can't go back any further.
Jerome Lane
Tax Advisor
jerome.lane@stewartco.co.uk
Stewart&Co.
Chartered Accountants
Telephone: 01276 61203

bd6759
Posts: 3107
Joined: Sat Feb 01, 2014 3:26 pm

Re: Self employed/not registered for Class 2 NICs

Postby bd6759 » Wed Jul 24, 2019 11:09 pm

there's no question of avoidance so they can't go back any further.
[/quote]

Class 2 NIC is not a tax. The Limitations Act applies. Avoidance doesn't come in to it,

mackers
Posts: 4
Joined: Tue Jul 23, 2019 6:35 pm

Re: Self employed/not registered for Class 2 NICs

Postby mackers » Thu Jul 25, 2019 3:18 am

That's good news, thank you all!

mackers
Posts: 4
Joined: Tue Jul 23, 2019 6:35 pm

Re: Self employed/not registered for Class 2 NICs

Postby mackers » Thu Aug 08, 2019 11:04 am

We spoke to HMRC on the phone, the person was pretty unhelpful and said that he wouldn't register my husband for class 2 NI unless we gave him the exact day in 2000 that he registered as self-employed, but they have now just sent him a bill for payments of £159 for 7 years, from 08-09, through to 14-15. If they can only go back 6 years should that start from this previous tax year, i.e. 18-19, and 5 previous years? Another question is that they say the NI is calculated at a higher rate because it wasn't paid in time, however as they should have known that he was self-employed and therefore due to pay Class 2 since he registered as self-employed in 2000, can they make him pay at the higher rate when he couldnt' have paid on time because he didn't know that it was due?<br/>
Many thanks.


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