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Where Taxpayers and Advisers Meet

Class 2 NICS contributions shortfall

CJCJ
Posts:4
Joined:Wed Jul 15, 2020 4:00 pm
Class 2 NICS contributions shortfall

Postby CJCJ » Wed Jul 15, 2020 4:33 pm

Hello, I'm looking for some advice please. I became self-employed in 1989 and still am to this date. I will be eligible for the state pension in 2021. However my accountant did not register me as self-employed until 2003, or so the pension service claim. My accountant retired and left the country in 2006. The pension service is saying I was not billed for NICS class 2 contributions for the years 1989-2003, meaning I will receive a state pension of £128.14 per week instead of the full £175.20, despite having worked for over 35 years in total (including previous jobs) and paid a shed load of income tax and NICS (Class 4!). My accountant had listed NICS contributions on my annual statements, which were in fact the Class 4 NICS. Back then there was no way to check your Class 2 records online and I had no idea that I should have been keeping track or double checking that I was paying Class 2 NICS - I was very busy working all hours! So busy, that I could have sworn I had regular invoices for Class 2 NICS and paid them, but can't be sure after all this time. I filed self-assessment tax forms and paid what was owed every year. I have called the pension service many times over the past few years when I first became aware of the shortfall when they sent me a statement of my contributions and pension forecast, but usually got no answers. After trying to get to the bottom of it for so long it was only a few months ago they finally told me the shortfall was due to my not being registered as self-employed from 1989-2003. Can it really be possible that I didn't pay Class 2 all those years yet filed self-assessment forms every year? Is there anything at all I can do now or is it too late? Many, many thanks for any insight you can give me.

robbob
Posts:3024
Joined:Wed Aug 06, 2008 4:01 pm

Re: Class 2 NICS contributions shortfall

Postby robbob » Thu Jul 16, 2020 8:50 am

CJCJ
Can it really be possible that I didn't pay Class 2 all those years yet filed self-assessment forms every year? Is there anything at all I can do now or is it too late? Many, many thanks for any insight you can give me.
Yes all too easy.

There is a substantial pool of people in a similar situation to you, it was quite hard for accounatnts back in the day as class2ni was billed directly to individuals so often accountants would not automatically been alerted to disrepancies as they arose or if they were present when clients where signed up.

Was this always accountants fault - no - plenty of clients came to us having registered themsleves using the wrong forms , also hmrc have been known simply to stop the class2ni record for uknown reasons that they have not been able to adequatley explain. sometimes what should have been one of low income exceptions were carried on longer than shpuld have been the case.

Presuming you have faithfully completed self assesment returns each year confirming you were sole trade and had earnings above the threshold you could write a letter of complaint to hmrc advising you dutifully completed your obligations each year and that it therefore should have been obvious to them that you were a sole trader and that they should have biled you the stamp and you would have paid. Perhaps copy in your MP if anyone can sort something like this it might be your MP. I wouldn't hold out much hope that you would have any success. They cannot deny though that they knew this mess existed so In your letter you should advise hmrc knew fine well for many years the class2ni system did not link up as it should have done and they chose to take no action whatsoever to sort the IT as they should have done - or at least in timely fashion warn sole traders that they were responsibble for taking additional measures to check on top of the normal tell hmrc every single year you are a sole trader. With no fuss a warning could easily have been sent out each year with the paper returns that were issued back in the day.

Note the one slight thing going against you here is it looks like your record was rectified in 2003 which suggests the issue may have been highlighted to you back then in which case that was really the time to address - thats speculation though - its entirely possible your accounatnt could have sorted behind the scenesas the time without flagging up the nightmare that existed.

This should be warning to everyone who has ever been a sole trader and is unsure about their state pension that they should log into their personal tax account or setup a personal tax account and login - and view their pension history - every year is there to view and there is a nice summary shoing how many more years stamp you need.

CJCJ
Posts:4
Joined:Wed Jul 15, 2020 4:00 pm

Re: Class 2 NICS contributions shortfall

Postby CJCJ » Thu Jul 16, 2020 9:42 am

Thank you so very much for your reply. The thing about being told I was finally registered as self-employed in 2003 is that I would have had no idea how to do that, or that I even needed to, so it wasn't me. It would also have been strange, but not impossible, for my accountant to suddenly register me after all those years out of the blue because they had alerted him to the problem but not me. But if HMRC did not change my status themselves, it must have been the accountant. Wondering if there is any way to find out who made the switch in 2003, if there is a signature that was required or the name of the registrant.

I will take your advice and write that letter, copied to my MP. And yes - a warning to others to keep a close check on their records now that it can be done very easily online.

Thanks again.


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