How does your tax return software deal with Class 2 NICs?

How does your tax return software deal with...

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Class 2 NICs are new for the 2016 tax return. How does your software deal with them? Are they automated? I use PTP which requires the total Class 2 NICs to be input manually. The software checks that you don’t input a figure which is more than 53 weeks of Class 2 NICs, but it doesn’t warn if you fail to input any figures, and it doesn’t warn if you input Class 2 NICs for someone over state pension age. PTP tell me that this method follows HMRC guidance. I’m curious about how other software handles Class 2 NICs. We’re still in the transitional period for changing state pension ages so you need a tool such https://www.gov.uk/state-pension-age to identify when the taxpayer ceases to pay Class 2 NICs. If you have a 64-8 you can log into HMRC online and the total Class 2 NICs due is displayed on the “Information to help you complete your tax return” page. Both methods are cumbersome compared to automated calculation. I know HMRC’s own software doesn’t pre-populate: checkout https://www.accountingweb.co.uk/anyanswers/question/new-class-2-section-sa-return.

Replies (28)

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By cstwragby
09th Apr 2016 11:24

Taxfiler currently prepopulates with a full-year. You can over-ride if the taxpayer ceased mid year. However they say an update coming out next week will adjust according to the cessation date.

They also say a later update will link direct to HMRC.

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Morph
By kevinringer
13th Apr 2016 09:24

Software that do calculate Class 2 NICs automatically

Taxfiler

Digita

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Morph
By kevinringer
13th Apr 2016 09:23

Software that don't calculate Class 2 NICs automatically

HMRC

CCH

PTP

Iris

Sage

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By The Innkeeper
13th Apr 2016 09:46

absolute

calculates the full year but you can override

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By RichardBrown
13th Apr 2016 10:03

Ftax requires a manual input of class 2 NICs. I have been in touch with them and "The SA100 will be upgraded soon to make it clearer".

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By gjakeman
13th Apr 2016 14:35

Class 2 NIC

I use PTP. I entered the correct amount for a client who ceased during the year (clearly shown on the SE pages) and when I submitted the tax return HMRC changed the amount to £145.60 which is for  52 weeks (they do not seem to know that there were 53 weeks as other clients show the £145.60 in the "information to help complete your tax return" on HMRC Gateway). Another super job by HMRC.

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Morph
By kevinringer
13th Apr 2016 15:53

52 or 53 weeks

Every client I have logged into online HMRC says 52 weeks. Is it 52 or 53? What day of the week triggers Class 2?

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By Tim Vane
13th Apr 2016 17:04

I always thought that Class 2 followed the same rule as pensions.

I'm fairly sure that pension entitlement is based on how many mondays are in a taxyear, and I believe there are 53 mondays in 2015/16.

However, it's possible that Class 2 uses a different day...so does anybody know?

 

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Replying to Tim Vane:
RLI
By lionofludesch
16th Jul 2016 10:02

Tim Vane wrote:

I always thought that Class 2 followed the same rule as pensions.

I'm fairly sure that pension entitlement is based on how many mondays are in a taxyear, and I believe there are 53 mondays in 2015/16.

As I approach claiming my pension, I can definitively state that your pension day depends on the last pair of digits in your NI number.

00-19 Mondays
20-39 Tuesdays
40-59 Wednesdays
60-79 Thursdays
80-99 Fridays

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By mabzden
13th Apr 2016 19:36

Weeks plus part weeks

I thought HMRC uses the number of weeks or part weeks (running from Sunday to Saturday) in the year or period of self-employment, running as from the first Sunday in the period.

So pretty close to the number of Mondays but could be slightly different.

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Replying to Hugo Fair:
RLI
By lionofludesch
21st Apr 2016 13:43

Back in the day .....

mabzden wrote:

I thought HMRC uses the number of weeks or part weeks (running from Sunday to Saturday) in the year or period of self-employment, running as from the first Sunday in the period.

So pretty close to the number of Mondays but could be slightly different.

Certainly at one time, pension days could be either Mondays or Thursdays, the pensions being split to ease the queues at the Post Office.  Tuesday was, of course, Family Allowance day.  I'm not sure that's true these days.  To be honest, I've not looked.

If HMRC used the number of weeks or part weeks, it'd always be 53 weeks, with a possibilty of 54 every 28 years.

I dunno - I thought the NI week ran Mon to Sun but it could be Sun to Sat.  In which case, 2015/16 was a 52 week year.

I'm going to enter 52 weeks and see if they come back for another £2.80.

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By DMGbus
21st Apr 2016 11:50

Class 2 NIC 52 Sundays @ £2.80 = £145.60

A page on HMRC website infers that the NIC contribution week starts on a Sunday.

In the 2015/16 tax year there are 52 Sundays, so £145.60 is actually potentially the correct liability, despite several software houses using 53 weeks = £148.40 as the liability figure, here's what TaxCalc have just said on this matter:

https://www.accountingweb.co.uk/anyanswers/question/taxcalc-or-hmrc-prob...

steve.taxcalc PM | Thu, 21/04/2016 - 10:06 | Permalink

Dear All,

Whilst there were good reasons to base the calculation of Class 2 NI on a 53 week basis (and it seems we were not alone in drawing this conclusion), it transpires that it should be calculated on a 52 weeks basis. Clients would be overcharged £2.80.

We have already been working on a fix to this. It’s currently with our Quality Assurance team and we intend to release within the next few working days. Your software will notify you of an update in due course.

For the future, HMRC have been developing an API (Application Programming Interface) that will enable software to fetch this figure directly from HMRC. We have already written code to make use of this but, unfortunately, HMRC have been delayed in bringing these new APIs to market.

Rest assured, we will continue to ensure that our software is accurate and well supported and we apologise for any  inconvenience caused.

Kind regards,

Steve Checkley
Director

 

 

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By vince8
21st Apr 2016 12:37

My software does not agree HMRC's

i have just taken on a client who reduced her 2015/16 POA's to £500 on the basis that her self employment was ceasing. I have done the SATR and filed it online. Since she ceased September 2015 I put the Class 2 in at 25 weeks and put a note in the white space. There is no tax to pay but there is £16.29 class 4 so £86.29 in Class 2/4 in total. I was expecting refund of £413.71, however HMRC are about to repay £340ish but there is a second POA 31/7/16 of £8ish which looks like the class 4 and a balancing payment of £145.60 31/1/17, which is the full years Class 2.

 

Why make a repayment then ask for the full years class 2 on 31/1/17? I assume I will get something from HMRC explaining why the return was processed differently and at some stage an amendment to the class 2? Does anybody know? Its no wonder PTP have a long wait time for calls.

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Replying to Hugo Fair:
RLI
By lionofludesch
21st Apr 2016 13:46

Don't knock it !

vince8 wrote:

Why make a repayment then ask for the full years class 2 on 31/1/17? I assume I will get something from HMRC explaining why the return was processed differently and at some stage an amendment to the class 2? Does anybody know? Its no wonder PTP have a long wait time for calls.

It's always been like that - you get a repayment of any monies not due in the ensuing six weeks.

You can always leave it with the Bank of HMRC if you wish.   Just let them know.

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By Tim Vane
21st Apr 2016 12:56

It seems that HMRC take their NIC data directly from the NI system, and that the figure submitted with the return does not override this. If the NI system has not previously been told that your client ceased self employment then they will not know to calculate the correct NI. You can notify HMRC of the date trading ceased and they should issue another revised calc. I am not sure if they will do this automatically as a result of the return being submitted.

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By DMGbus
21st Apr 2016 14:09

Week commencing Sunday...per NIM20550
 

https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim20550

The above webpage states that class 2  week liability dates (eg. 10 April 2011) start on Sundays (as opposed to some suggestions on this forum as Monday being the start of the class 2 NIC liability week.

This, as already stated in my earlier postas, justiofies HMRC's £145.60 liability (52 weeks) rather than what several commercial software providors are saying (ie. 53 x £2.80 = £148.40).

I will let others check this out in the legislation (if the answer exists there!):

Regulation 89 of the Social Security (Contributions) Regulations 2001 (SI 2001 No 1004) as amended by regulations 1(2) and 6 of the Social Security (Contributions)(Amendment No. 3) Regulations 2011 (SI 2011 No 797)

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By DSP Financial Management
21st Apr 2016 14:13

Many years ago - Class 2 NIC records were a shambles.

They were tidied-up and some clients faced a demand for 18 months to 2 years.

I'm most surprised that when informing self employed SA Return tax payers that they did not ask them to inform them of any SE business cessation during the tax year in the letter.

HMRC are owed a significant amount for Class 2 arrears, we know this, however, given the shambles in the past, you would have thought that at the very least, senior management would have thought through the process and mechanism for Change Strategy.

A web link with National Insurance numbers and UTR could have been set-up for business cessation.

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By mabzden
21st Apr 2016 14:18

Tax year vs AP

Am I missing something, or is the number of weeks in the tax year irrelevant?

If you prepare a set of accounts ending 30 April 2015 to include in your 2015/16 tax return, I assume you pay Class 2 based on your AP. The taxpayer should have paid Class 2 NI direct to HMRC up to Saturday 11 April 2015. So there were three other Sundays in April 2015, meaning a further £8.40 is due via self assessment.

There are other complicating factors such as age and whether the taxpayer was up to date with their Class 2 payments under the old system. Maybe that's why HMRC is saying leave the calculations to us.

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Replying to Hugo Fair:
RLI
By lionofludesch
21st Apr 2016 14:47

Yes

mabzden wrote:

Am I missing something, or is the number of weeks in the tax year irrelevant?

If you prepare a set of accounts ending 30 April 2015 to include in your 2015/16 tax return, I assume you pay Class 2 based on your AP. The taxpayer should have paid Class 2 NI direct to HMRC up to Saturday 11 April 2015. So there were three other Sundays in April 2015, meaning a further £8.40 is due via self assessment.

There are other complicating factors such as age and whether the taxpayer was up to date with their Class 2 payments under the old system. Maybe that's why HMRC is saying leave the calculations to us.

Yes, you're missing that it's nothing to do with your accounting period.

It's purely tax year and based on the number of - and this is new to me - Sundays in the tax year.

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By vince8
21st Apr 2016 14:20

PTP software

In my case the client had paid £500 as a POA on 31/1/16 and my software deducted the Class 2/4 (ignore the Class 2 debate for now) to leave a refund hence me saying my software does not agree with HMRC's. HMRC's is asking for a second POA of 50% of the Class 4 and the balancing payment being the Class 2 of £145.60 but I need it amending to £70. I thought the cessation date on the SATR would suffice but will do a separate notification. However HMRC seem to be saying the Class 2 is due on 31/1/17. Is the Class 2 going to be outside the normal run of things and as a matter of interest does it fall into the POA calculations (not done one yet with higher income)

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By Tim Vane
21st Apr 2016 14:48

Class 2 is due on 31 Jan, and is not included in POA calculations.

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RLI
By lionofludesch
21st Apr 2016 14:50

I suppose .....

I suppose we can confirm it's Sundays by seeing if we paid 53 weeks for 2014/15.

When I've a minute ....

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By vince8
21st Apr 2016 15:07

thanks Tim

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By DSP Financial Management
21st Apr 2016 15:29

Change management and strategy

I am surprised that HMRC did not leave it to Agents and individual self assessment filers to correct and calculate their NIC class 2 liability. Given that we have all the details and DOB and attend to each individual record, and that Self filers are generally keen to get it right, they would have had better records and perhaps better cash flow (quite small in its entirety)

For those on direct debit - leaving the matter alone - would have been a wise move.

APs do not figure at all in this policy. So now HMRC are futher in arrears with their collection of monies due.

POA for those with a balancing charge of over 20% could have collected some Class 2 earlier, but I rather fancy that the majority of those taxpayers were already paying by direct debit.

I wonder who was consulted on the new policy, and its implementation . . . . .

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Replying to Wanderer:
By Tim Vane
21st Apr 2016 15:23

You were!

DSP Financial Management wrote:

I wonder who was consulted on the policy and its implementation . . . . .

It was proposed by the office of tax simplification in 2012, and there was an open consultation in 2013 to which anybody could respond.

So the answer is: everybody.

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Replying to Hugo Fair:
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By DSP Financial Management
21st Apr 2016 15:59

That'all teach me for being indignant

Tim Vane wrote:

It was proposed by the office of tax simplification in 2012, and there was an open consultation in 2013 to which anybody could respond.

So the answer is: everybody.

Oh! Urrrmm  - I didn't see the consultative document. Thank you Tim.

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Morph
By kevinringer
21st Apr 2016 15:28

Another great HMRC un-"simplification"

I did respond to the 2013 consultation and have already responded to the current consultation on abolishing class 2. I have asked why HMRC have gone to the expense of changing their C2NIC systems onto SA when they intend to scrap it completely. I did notice that originally they intended to scrap C2NICs from 2017 onwards but now are saying it won't be until after 2018.

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Morph
By kevinringer
15th Jul 2016 09:46

I've just been contacted by HMRC to say that they have identified the cause of the missing "Information to help you complete your tax return" link for some taxpayers. A fix is being worked on and will be implemented on 26/09/16. That is some way off, but at least it will be in place before the silly season.

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