Refund of class 2 NI

Refund of class 2 NI

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Journalist made loss for 05/06 after a profit of 18,000 in 04/05, due to mostly getting only Schedule E income in the second year. He paid Class 2 contributions and has now been told he can't have them back. Is this reasonable/normal? I thought HMR&C's view was that it was important that the Right amount of tax was paid.

A small earnings exception has not yet been submitted for this year
Yvonne

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By geoffemtacs
23rd Feb 2007 07:07

They're right
...although it does seem unfair. The deadline for a request for the refund of Class 2 contributions is 31 Jan following the year in question, so you've blown it by 3 weeks. This somewhat penalises people who don't do their tax returns promptly because you don't know the circs until January and are probably too busy to think about such things. But the deadline is there in some convoluted back-water of NI regulations.

I have an even unfairer one. We back-registered a new client for 4 or 5 years in October. NICO sent a demand out for the back years (despite being told of small earnings) which the client paid unbeknownst to me. They are now refusing to refund these because the guy missed the deadlines. Which means he had to have asked for a refund before he'd even paid the Class 2's. Further discussions continue...

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By User deleted
23rd Feb 2007 09:03

Apply for small earnings exception at outset
As Geoff has said there are strict deadlines for applying for a refund - 31 January after tax year concerned he quotes. It used to be 31 December after the tax year - I don't know when the rules changed to give the extra month.

Because of this strict deadline I usually apply for SEE (Small Earnings Exception) as a matter of routine where the profit (or loss) cannot be predicted to be certainly above the SEE limit (currently profits of £4465 pa., becomes £4635 from 6 April 2007). Another good reason to go for exception is the great difficulty in getting refunds from NICO - best not pay in the first place if at all possible.

When advising clients to go for SEE I advise them to put the Class 2 NIC's money aside as a sort of deferred tax liability which may (or may not) be payable once accounts are drawn up.

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