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HMRC rejecting Class 2 NI on 2016 self assessment

HMRC rejecting Class 2 NI on 2016 self assessment

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We have recently filed sole trader tax returns and have included the Class 2 NIC where profits have exceeded the lower limit. HMRC have revised the tax returns and credited the Class 2 contribution back to the client. We have spoken to the agent dedicated line (twice) and neither person was able to help and even when asking for a referal to a technician they refused to take the call. Should we continue to include Class 2 NI for fear that our filings could be subject to an enquirey for incorrect/eroneous filing? Have we missed something and Class 2 NI contribuitions have already been abolished?

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RLI
By lionofludesch
17th May 2016 11:48

Of course you should include Class 2 NIC. What choice do you have? It's due.

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Replying to lionofludesch:
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By Debbie Danahar
17th May 2016 11:53

So why are HMRC revising the tax return and crediting the payment back to the client?

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Replying to Debbie Danahar:
By Tim Vane
17th May 2016 12:10

Debbie Danahar wrote:

So why are HMRC revising the tax return and crediting the payment back to the client?

Because they cannot tell their arse[***] from their elbow. Just keep filing the correct returns. You can't be expected to do HMRC's cockups for them.

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Replying to Tim Vane:
RLI
By lionofludesch
17th May 2016 12:13

Tim Vane wrote:

Debbie Danahar wrote:

So why are HMRC revising the tax return and crediting the payment back to the client?

Because they cannot tell their arse[***] from their elbow. Just keep filing the correct returns. You can't be expected to do HMRC's cockups for them.

As usual a fair, reasoned and highly accurate assessment, Tim.

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Replying to Debbie Danahar:
By Duggimon
17th May 2016 12:14

Debbie Danahar wrote:

So why are HMRC revising the tax return and crediting the payment back to the client?

Because they are a ludicrously inefficient and ridiculous organisation who are only consistent in their inconsistency.

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Replying to Duggimon:
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By JoandToby
18th May 2016 15:57

We have got the same problem with one of our client's. HMRC have issued an amended tax calculation without any class 2, even though her profit was £8000, so she should be paying it. I phoned the agent helpline yesterday and they have no idea why it's been taken off and the issue has been referred to another department, so no doubt we will wait several weeks for a conclusion. It's quite worrying thinking about how Making Tax Digital is going to work, when something as basic as this is going wrong!

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Replying to Debbie Danahar:
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By Andp
17th May 2016 12:28

Sadly I too have experienced similar class 2 nic complications.
I feared last year that most "new" regimes would cause us more work and stress down the line.Sometimes , there is definitely more remedial work to do after dumping £145.60 on the calc
My recent findings relating to the debacle , from calling the agent helpline and nic helpline include ...

client has never paid class 2 nic , even though they should have or

client has indeed paid class 2 nic but there is no record of it or

HMRC SA dept is not in communication with NIC dept., or

client is SA registered but not registered to pay class 2 nic .

Both HMRC helplines advised me that it is only the client that can sort this nic mess out by phoning 0300 200 3500 nic helpline and "correcting their record .

Do not even ask about the HMRC treatment of class 2 nic upon the cessation of self employment - that is another nightmare in the making

I read somewhere it is too costly to collect class 2 nic £10 pcm by direct debit hence the lump sum collection in January. But it is ok to pay your road tax monthly !

I start self employed tax returns these days with .. When did you last pay Class 2 NIC?, have you ever paid class 2 Nic?, please phone this nic dept and put the record straight .

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Dog
By ClaireB
17th May 2016 12:10

I had this; the HMRC chap told me it was an "IT error" and that a revised calculation would be issued.
All you can do is make your clients aware that the calculation that they have been sent is incorrect and that they should still budget to pay the Class 2 NICs.

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Replying to fawltybasil2575:
RLI
By lionofludesch
18th May 2016 12:46

fawltybasil2575 wrote:

As a general comment, sadly HMRC's systems are substantially awry in relation to the inclusion of Class2 NI. Frankly, unless there is a particular reason to file 2015/16 Tax Returns early, there is something to be said for postponing the submission of Tax Returns, in the hope that HMRC will rectify their systems within the next few months.

As to your current dilemma, the fundamental point is that a taxpayer is obliged to submit information, on his Tax Returns, which he believes to be correct [not what HMRC say is correct].

Since you have submitted a Tax Return which you know to be correct, and since you have received an amended Tax Return from HMRC which you know to be incorrect, I would suggest a letter to HMRC on the lines of:-

"With reference to your amendment [dated xx/xx/xxxx] to the 2015/16 Tax Return, such amendment is incorrect and you must now amend the Tax Return figures back to those on the Return submitted by myself [which included the correct Class 2 NI figure]. I have been unable, in telephone conversations with your office, to speak to any HMRC officer who understands the matter, and if I receive any further correspondence maintaining that the current HMRC stance is correct, then the appropriate claim will be made, under your redress policy, for the costs incurred".

The above may appear OTT, but should result in its being considered more carefully by HMRC [head your letter "FORMAL COMPLAINT"].

Personally I would never engage in telephone discussion with HMRC over such matters [such is my personal view, albeit others prefer the telephone approach] - in this case, the telephone approach having been unsuccessful, I would certainly now adopt the "letter approach".

In the hopefully unlikely event that HMRC have not rectified their records by 31 January 2017, please ensure that your client pays the correct amount [by of course adding the Class2 NI liability to the figure per the (as will then still be incorrect) HMRC demand].

Basil.

I meant this but the eloquence with which Basil puts it is breathtaking.

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By nogammonsinanundoubledgame
25th May 2016 05:23

If you resile under s.9ZB(5) TMA 1970 from an adjustment made by HMRC under s.9ZB(1), then they have no choice but to restore the return to its original state under s.9ZB(4) and then, if they continue in the belief that their adjustment was correct, open an enquiry under s.9A TMA 1970, at which point you may defend the return as filed.
With kind regards
Clint Westwood

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Replying to nogammonsinanundoubledgame:
RLI
By lionofludesch
18th May 2016 12:58

Resile - great word.

Bet you got it off Basil, didn't you ?

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By Paul D Utherone
17th May 2016 13:34

Did they carry on paying by direct debit? Presumably if so then there is no need to pay again through the SA return? Not come to this yet, so just wondering out loud & happy to be shot down in flames if that does not compute

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Replying to Paul D Utherone:
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By Debbie Danahar
18th May 2016 12:58

It was not possible to pay by direct debit as HMRC cancelled a DD's back in July 2015

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By SJRUK
17th May 2016 14:21

Are you sure the client isn't still paying the monthly DD - this is still happening in some cases. Very slim chance HMRC could be right?

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Replying to SJRUK:
RLI
By lionofludesch
18th May 2016 14:33

SJRUK wrote:

Are you sure the client isn't still paying the monthly DD - this is still happening in some cases.

I find this very hard to believe.

A direct debit is initiated by the payee - HMRC. A standing order, on the other hand, is initiated by the account holder. You were never able to pay your Class 2 NI by standing order.

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By Debbie Danahar
17th May 2016 14:44

Many Thanks everyone. We have found out that our client has not been paying Class 2 - looks like they will have some catching up to do!
We will appeal the HMRC revised tax return and ask all sole trader clients their Class 2 status in future.

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By bumpdinkwhallop
17th May 2016 16:17

I have had around 40 tax calculations sent to me from HMRC adjusting the tax repayable. All in relation to Class 2 NIC. The letters say they can only use the figures they hold and we if disagree with the decsion.... Blah, blah, blah

Funnily enough around another 20 have had the class 2 NIC deducted from the repayment. All have been for CIS subcontractors and all (mostly) have been repayment claims.

Iv been too busy to think about it too much but merely told all the clients concerned that its likely HMRC will be asking for the amounts due soon

The strange thing about it is that mostly i got the class 2 figure from the HMRC website under "additional information"

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By Daffodilbach
19th May 2016 10:04

I have been scratching my head over the class 2 issue all week. I have asked my software provider how to record it and they just sent me a fact sheet on the changes of which we all know all ready. My dilema is some clients have continued to pay by direct debit so I didn't know whether to still record the class 2 entry on their tax return. There isn't a box to tick saying already paid. Other clients have no idea whether they have paid it or not!!! I have decided to enter £145.60 on everyones return and let HMRC adjust as they want as I just can't think of another way around it.

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By nogammonsinanundoubledgame
19th May 2016 11:39

Not saying that anyone here has fallen into this trap, but some D/D payments of class 2 NIC collected in the early part of 2015-16 tax year, possibly up to July 2015, were on account of 2014-15 liability (you can check this by looking at the weekly rate applied). I fear that some may be seeing these payments as part payment on account of 2015-16.

With kind regards

Clint Westwood

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By claudialowe
19th May 2016 16:18

3 letters have arrived today. All of them have revised the tax calculations to exclude the class 2 NICS. One of them was a subbie who had a rebate. Good luck to HMRC trying to claim that back again. I thought about contacting the clients who's returns I have already submitted to let them know that HMRC are wrong, but have decided to wait for the client to contact me. However from now on, I will warn clients about this, and to wait for the system to update itself, if it can before January 2017.

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