Class 2 Missing from HMRC Tax Calc

Class 2 HMRC Letter

Didn't find your answer?

Over the past 3/4 months 6 sole trade clients once I have completed their tax returns are receiving tax calculations that are different to the tax return, their profits are well above the thresholds yet they are getting tax calculations all with Class 2 NI missing?

Anyone else experienced this recently?

Replies (20)

Please login or register to join the discussion.

By ireallyshouldknowthisbut
31st Jul 2023 09:07

You must be very new....HMRC have been doing this for years.

Class 2 NI does not come from the tax return. It is a completely separate process, essentially the same one as when Class 2 was paid as a standalone item.

Once your client is registered for Class 2 HMRC will stop revising your agent file return.

Tip: when looking at your agents account you can if a client has or has not got Class 2 tagged on their account. Under "information to help keep your tax return"

There are a huge number of problems with class 2, as often you register, and it still doesn't show up.....or they dont take it off, or, many other issues.

Thanks (4)
avatar
By Catherine Newman
31st Jul 2023 09:27

As Ireallyshouldknow has said, it has been happening for years.

HMRC say that the client didn't register as self-employed properly even though have filed through SA for years. It is pointless arguing with them. I have brought it to the attention of my MP and his researchers.

The only way to sort it out is preferably the affected clients ring the NI department themselves and arrangement payment directly.

Thanks (1)
avatar
By carnmores
31st Jul 2023 09:47

obdurate behaviour by HMRC. the filing of a tax return should be treated as a defacto registration for self employed people.

Thanks (4)
Replying to carnmores:
avatar
By rmillaree
31st Jul 2023 11:38

hmrc often have a point that an individual on theior agent has not done a valid registration that would backup the fact that they are sole trader. The computer cannot be overidden here so one has to face facts that like it or not the independently held class2 NI record needs to be aligned befoee proceeding.

did i perhaps read an article to say this issue was being addressed soon ?

Thanks (0)
RLI
By lionofludesch
31st Jul 2023 09:47

Loads of threads on this.

HMRC will say it's the contributor's fault. Sometimes it is. More often than not, it isn't.

Thanks (1)
Replying to lionofludesch:
avatar
By Self-Employed and Happy
31st Jul 2023 09:56

Since reading the replies I have actually found all of the people it's happening to are people we have signed on in the past year and already had an existing Self Assessment record set up!

Thanks (1)
Replying to Self-Employed and Happy:
RLI
By lionofludesch
31st Jul 2023 10:01

Self-Employed and Happy wrote:

Since reading the replies I have actually found all of the people it's happening to are people we have signed on in the past year and already had an existing Self Assessment record set up!

And did they set up that record themselves ?

Thanks (1)
Replying to Self-Employed and Happy:
By ireallyshouldknowthisbut
31st Jul 2023 11:01

Self-Employed and Happy wrote:

Since reading the replies I have actually found all of the people it's happening to are people we have signed on in the past year and already had an existing Self Assessment record set up!

SA record, not an NI record. Different things.

Thanks (1)
Replying to Self-Employed and Happy:
avatar
By rmillaree
31st Jul 2023 11:44

that tallies with my experience that these are the main clienst with issues.

Note with covid its probably to be expected a few clients did actually cease at some stage (to claim beenfits?) temporarily and probably started back up very soon after - so i suspect if its not complete lack of earlier registration itn could be that they did cease and hmrdc were aware of that fact and for whatever reason hm,rc were not advised of new start date. Could also be hmrc hopelessness too - they are often very sketchy ref reasons for class2 stopping when pushed on the subject!

Thanks (1)
By SteveHa
31st Jul 2023 10:26

It always beffudles me. HMRC's "correction" is made in accordance with TMA 1970 S9ZB(1). S9ZB(4) renders their "correction" ineffective if the taxpayer objects.

Why do people not use this simple mechanism to restore the Class 2. If enough did, HMRC may finally get around to joining up their systems.

Thanks (1)
Replying to SteveHa:
By ireallyshouldknowthisbut
31st Jul 2023 10:45

@steve, because HMRC ignore any such objection, as the computer says no NI is due.

We haved one that has been going for for 2 years now.

The main issue for clients is the qualifying year for state pension, if its "forced" at the tax return end I can guarantee at the NI record end a qualifying year won't be being created.

We have a number of clients with SA on the side and full NI through PAYE and I do one letter (which is ignored) and quite frankly its then HMRC's problem if they cant be bothered to collect the tax we have told (twice, tax return and letter) is due.

Thanks (1)
Replying to ireallyshouldknowthisbut:
By SteveHa
31st Jul 2023 13:45

Granted, though S9ZB(4) is unconditional. HMRC can't refuse because their computer says "No".

And on the back of that, if they then incorrectly failed to credit the Class 2 as a qualifying year I'd be happy to argue the point at Tribunal.

Thanks (1)
Replying to ireallyshouldknowthisbut:
RLI
By lionofludesch
31st Jul 2023 15:32

ireallyshouldknowthisbut wrote:

@steve, because HMRC ignore any such objection, as the computer says no NI is due.

Agree. The problem isn't the legislation.

The problem is getting HMRC's attention.

Thanks (0)
Replying to SteveHa:
avatar
By carnmores
31st Jul 2023 11:12

thanks Steve that's a great help , also noted the comment from Ireally so thanks also for that

Thanks (0)
avatar
By Catherine Newman
31st Jul 2023 11:52

I have got one where she has been in a partnership with her husband for well over 20 years and they reject it every year. She isn't bothered but it has to go on the return but gets rejected every year.

I've got another one where the wife became a partner as a result of a full enquiry when SA first came in. The Inspector at the time allowed us to do it and set it up there and then. Her NI gets rejected every year.

Thanks (0)
By K81
31st Jul 2023 11:57

Are these clients where the income is between the small earnings exemption & lower limit as these are deemed to have paid class 2 NIC under new legislation rather than the not correctly registered for self-employment cases.

Thanks (1)
Replying to K81:
avatar
By Self-Employed and Happy
31st Jul 2023 12:02

Nope they are well above the lower limit.

Thanks (1)
avatar
By KenKLM
23rd May 2024 09:28

I find the only way around this is to re-register self employed . Backdate it if your client needs to back fill years they have been self employed in. Make sure they have enough years for full state pension. To do so they need to open their personal tax account .. which many are avoiding / can’t do .

At least for 2024/25 HMRC seem to have acknowledged their cockup and abolished class 2 !

Thanks (0)
Replying to KenKLM:
avatar
By Matrix
23rd May 2024 11:17

It’s a mess but the client would need to agree to backdating.

I asked HMRC to write to my client where HMRC just can’t add the NI flag to the SA record (been trying to get it reinstated for 3-4 years) to offer to backdate since it is up to him.

Thanks (0)
Replying to KenKLM:
avatar
By FactChecker
23rd May 2024 15:33

"At least for 2024/25 HMRC seem to have acknowledged their cockup and abolished class 2 !" ... I hope that simplistic message is NOT being given, without clarification, to affected clients.

It is only those S-E where their profit is *above the lower profits limit* (currently £12,570), from this tax year onwards, that class 2 NIC will be treated as being paid.

Anyone whose profits are between the small profits threshold (£6,725) and the lower profits limit will NOT be deemed to have paid class 2 NIC ... but will still have the *option* to make voluntary class 2 NIC payments.
Strange but important!

Thanks (2)