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Class 2 NIC not being collected by HMRC

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I have recently taken over a practice from a retiring accountant.

One of the clients is a partnership between father and 2 sons, which has been trading for over 35 years. Looking back on the client's returns, the partnership has been making minimal profits due to AIA claims.

I have completed their tax returns for 2019-20 and calculated their tax and NIC incl Class 2 NIC payable and submitted to HMRC

HMRC have written back today with amended tax calculations without the Class 2 NIC saying the calculations have been amended in accordance with the information they hold.

I am worried that not having paid Class 2 NIC, they will not qualify for State Pension on retirement. I don't have all the records going back to check the history but the clients inform me that they remember paying NIC by stamps, and later receiving Class 2 NIC demands but for some time they don't remember receiving demands and assumed that all the taxes and NIC were being paid via their SA tax returns.

 

It's obvious that HMRC knew they have been self-employed but why the Class 2 NIC was never picked by the NI contributions office or HMRC is a mystery.

 

I know they can pay back the backdated NIC by making voluntary contributions, but this could be a costly exercise

 

Any ideas what the clients can do to resolve this matter?

 

Replies (12)

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By Paul Crowley
15th Jan 2021 12:23

Several threads on this
CWF1 is what will fix it

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RLI
By lionofludesch
15th Jan 2021 12:23

How old are these fellas ?

Did they tick the box to pay voluntary contributions ?

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Replying to lionofludesch:
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By Max Maxwell
15th Jan 2021 12:39

Father is over 80 and getting his retirement state pension.

The two sons are 65 and 58 respectively

The 65-year-old has received a letter from the NI office that he hasn't paid enough NI to qualify for state pension and is devastated

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Replying to Max Maxwell:
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By Paul Crowley
15th Jan 2021 12:55

The NI payment changed around 2016
Prior to that clients paid themselves directly, not through tax return
4 year out of a 49 year working life is trivial: suggests he just never signed up and paid his class 2

But no worries, Pension Credit will top him up

How many years missing?

My guess
His entire self employment

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By Paul Crowley
15th Jan 2021 12:58

By the way
This is not HMRC fault
client just never bothered to pay
HMRC would see this as deliberate evasion

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By Wanderer
15th Jan 2021 13:04

Max Maxwell wrote:

I know they can pay back the backdated NIC .......

Be careful. Late payments don't always result in making it a qualifying year.
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RLI
By lionofludesch
15th Jan 2021 13:16

You only need ten years contributions to qualify for a pension of sorts.

Getting nothing suggests 40 years missing. Which is more than the period of self employment.

Contributions were paid by monthly direct debit or quarterly payment until 2014/15.

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Replying to lionofludesch:
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By Paul Crowley
15th Jan 2021 13:25

I have a 'client' that chose not to pay
He also chose not to declare self employment and poll tax

There are lots out there

Next we will hear that rent was never declared because he 'did not know' it was taxable

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Replying to Paul Crowley:
RLI
By lionofludesch
15th Jan 2021 13:34

Paul Crowley wrote:

I have a 'client' that chose not to pay
He also chose not to declare self employment and poll tax

There's no evidence that that's so in the instant case.

You'll be telling us that there's been widespread electoral fraud next.

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By Paul Crowley
15th Jan 2021 13:33

Not really your problem
If they remember stamps, they knew they needed to pay and chose not to

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Replying to Paul Crowley:
RLI
By lionofludesch
15th Jan 2021 13:37

Paul Crowley wrote:

Not really your problem
If they remember stamps, they knew they needed to pay and chose not to

Stamps ended in 1984. Which is 37 years ago - longer than they've been trading.

Clarify their recollection with them.

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By Vaughan Blake1
15th Jan 2021 14:45

Best place to start is by submitting a BR19 or digital enquiry on the client's Gov't Gateway (sadly not your agent one!). This will show what and when any Class 2 payments were made.
As a previous poster had said, HMRC are 'recalculating' tax if their records do not show that the taxpayer is registered for Class 2 . I have had many of these cases where the client has been happily paying Class 2 for donkey's years. A CWF 1 will sort this, although in better times, a call to the NIC office could resolve this straight away.
Left hands and right hands when Class 2 started to be collected via SA!

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