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Class 2 NICs denied

Self-employed person denied voluntary C2 NICs because 'not registered' with NI office

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A self-employed individual filed self-assessment returns for several years and should be eligible to make voluntary Class 2 NICs. The business profits were always below the threshold for compulsory NICs so no contributions were made at the time.

HMRC is fully aware of the existence of the business and would have automatically demanded NICs if the profits ever exceeded the threshold. However, the taxpayer's request to pay Class 2 NICs voluntarily has been rejected 'because not registered with the NIO as self employed during these years'. The claim is not time-barred; this is the only reason.

It seems like a perverse outcome, given that the NIO is part of HMRC. Does anyone know how one should 'register' with the NIO if not by notifying the tax office of self-employment, and how the rejection might be challenged?

Replies (15)

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RLI
By lionofludesch
21st Jan 2020 10:05

Where have you been for the last 18 months, Dan ?

Common error - HMRC will say the conributor hasn't registered as self employed. Whether it's their fault or the contributor's is a moot point.

The answer is to register formally but, if they're happy to collect income tax from the self employment pages, it's a load of old tosh.

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Replying to lionofludesch:
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By Dan365
21st Jan 2020 10:31

Ha ha! Asleep at the wheel, evidently.

What have I missed?

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By Wanderer
21st Jan 2020 10:42

Dan365 wrote:

.... and would have automatically demanded NICs if the profits ever exceeded the threshold.

No they wouldn't. See the many (several in the past week) posts on this subject.
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By David Heaton
21st Jan 2020 11:45

The legislation (SSCBA 1992, s 11(6)) says the client can pay Class 2 voluntarily if he is self-employed but his relevant profits are too small to create a liability. The fact that HMRC's systems can't process those contributions does not cancel this right to make voluntary NICs. Speak to the NIC (not SA!) helpline (try 0300 200 3504) and get him registered retrospectively. Then apply to pay the voluntary NICs.

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Replying to David Heaton:
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By Dan365
21st Jan 2020 12:14

Thanks David, I shall.

The existence of several years of SA returns seems to have gone under the radar as far as NI goes ...

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Replying to Dan365:
By SteLacca
21st Jan 2020 12:35

The joys of joined up Government.

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By SXGuy
21st Jan 2020 13:03

Your first error is assuming that your client would be automatically enrolled in to class 2 ni simply because they had SA profits above the threshold. That's not how it works.

Granted that in this day and age if you register for SA online you are also registered for class 2 ni but that wasn't always the case. There are plenty of people who registered donkeys years ago who hmrc did not register for class 2 and it was up to the tax payer to do it. It's only since class 2 ni has come in to SA that people are realising they were never registered as hmrc are removing it from their calculations.

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Replying to SXGuy:
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By Matrix
21st Jan 2020 13:12

Only if you use the CWF1 form, not if you use the SA1 form.

It is such a mess, I had two calcs from HMRC today removing class 2, both new clients whose previous accountants never registered these clients.

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Replying to Matrix:
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By Dan365
21st Jan 2020 17:15

Hi Matrix

Which form are you saying is best to register to enable Class 2 NI voluntary payments - CWF1 or SA1?

The taxpayer has been filing SA tax returns for several years, but the NIO apparently isn't in the loop.

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Replying to Dan365:
RLI
By lionofludesch
21st Jan 2020 17:23

Dan365 wrote:

Hi Matrix

Which form are you saying is best to register to enable Class 2 NI voluntary payments - CWF1 or SA1?

The taxpayer has been filing SA tax returns for several years, but the NIO apparently isn't in the loop.

CWF1.

Has NI been accepted by HMRC in previous years ?

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Replying to lionofludesch:
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By Dan365
21st Jan 2020 18:20

Not during self-employment, when profits were below the threshold and no NICs were due or paid. SA returns were filed for every year, HMRC having supplied a UTR at the outset.

The years of s-e were sandwiched between employed (PAYE) years.

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Replying to SXGuy:
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By lionofludesch
21st Jan 2020 13:21

With all due respect to these theories, I had four cases of missing NI, one of which was myself.

I was never able to trace any pattern which would suggest why these four cases should be singled out.

I didn't have to fill any forms in to correct the issue. A ten minute phone call (after a twenty minute wait) resolved all four cases. The fact that I didn't need to submit any forms suggested to me that we'd just dropped off the HMRC radar through human error when the files were transferred to the SA system.

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Replying to lionofludesch:
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By Matrix
21st Jan 2020 13:58

Thanks Lion. I think I will call up with all the missing ones after SA season and get it resolved that way. Good idea.

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Replying to SXGuy:
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By Dan365
21st Jan 2020 14:00

The profits were under the Class 2 NI threshold for the relevant years in this case.

From the posts here, it looks like a CWF1 filing and phone call should sort it.

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Replying to Dan365:
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By Matrix
21st Jan 2020 17:34

The problem is that I have loads where I don’t know the start date for self-employment. If you are doing a few then call up as Lion says but check your clients need the years so they don’t get a big bill and then don’t thank you.

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