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How Sophisticated is HMRC Tax Return Program re NI

Am Getting Different Result re Class 2 Compared to Using Taxcalc for 2017/18

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Have just got new client's 2017/18 copy SATR as filed using HMRC's online service, as input by previous deceased accountant. I use Taxcalc.

I input the HMRC online service data for 2017/18 just to compare results and Taxcalc is showing a difference.

2017/18 P60 gross was around £9,150. Net self-employed profit was around £15,250. Taxcalc is showing all of the Class 2 payable. The HMRC online service copy return is showing no Class 2 payable. I do not understand why the HMRC program showed no Class 2 NIC payable of £148.20.

I did not think client was anywhere near any NIC maximum payment limits. Is the HMRC program sophisticated enough yet to put a cap on Class 2/4 NIC chargeable.

 

Replies (14)

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By Matrix
20th Jan 2020 06:12

It is most likely that the client is not registered as self employment with NICO. There is no reduction of class 2 at that level of earnings.

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Replying to Matrix:
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By atleastisoundknowledgable...
20th Jan 2020 08:12

Matrix wrote:

It is most likely that the client is not registered as self employment with NICO.

I’ve had a few come back w/o Class 2 in the last few years.

How does one go about informing NICO now for those, and also for new traders?

Thanks

Thanks (1)
Replying to atleastisoundknowledgable...:
By penelope pitstop
20th Jan 2020 11:23

I think I had to phone NICO and did it over the telephone. No good phoning agents hotline for SA because although they took details over the phone, it is NICO who want to know the start date for Class 2 purposes.

For new traders there was an old form to complete. Wonder if there is a new online form to complete though now.

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Replying to penelope pitstop:
RedFive
By RedFive
20th Jan 2020 11:56

See my previous reply below Pen!

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Replying to Matrix:
RLI
By lionofludesch
20th Jan 2020 10:21

Matrix wrote:

It is most likely that the client is not registered as self employment with NICO. There is no reduction of class 2 at that level of earnings.

Agree. Their will be a dispute as to whose fault that is.

HMRC will say the contributor, the contributor will say HMRC.

I'd lay odds of 1/3 HMRC.

Thanks (1)
RedFive
By RedFive
20th Jan 2020 11:57

Use this structured email to register a starting date for self employment and trigger the correct Class 2 treatment.

https://www.tax.service.gov.uk/shortforms/form/CWF1ST?dept-name=CWF1&sub...

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Replying to RedFive:
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By Matrix
20th Jan 2020 12:03

Alternatively, leave it for HMRC to pick up.

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Replying to Matrix:
RLI
By lionofludesch
20th Jan 2020 12:12

Matrix wrote:

Alternatively, leave it for HMRC to pick up.

Pfft !! Risky !

It's the tax that I'm most keen to ensure paying.

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Replying to Matrix:
RedFive
By RedFive
20th Jan 2020 12:13

Doesn't happen in my experience. If you submit with the class 2 included then they send a revised notice effectively stating the return is wrong and remove it.

It's left up to the taxpayer or agent to fix it, never seen it fixed internally by hmrc.

I've seen a fair few, and much reported on Aweb suprised you haven't matrix?

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Replying to RedFive:
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By Matrix
20th Jan 2020 12:20

But the taxpayer already has a year’s Class 1 contributions, if HMRC don’t want to collect the Class 2 because their systems are inadequate then it is their systems which need changing. The tax return was correct and the adviser could complete the form to pay approx £150 for no benefit.

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Replying to Matrix:
RLI
By lionofludesch
20th Jan 2020 12:31

Fair point.

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Replying to Matrix:
RedFive
By RedFive
20th Jan 2020 12:43

I see your point and agree. I have 'forgotten' in the past to register for class 2 when a client has a small side hustle as well as a full time job but has exceeded class 2 threshold. As you say they would be paying twice.

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Replying to RedFive:
RLI
By lionofludesch
20th Jan 2020 12:57

RedFive wrote:

I see your point and agree. I have 'forgotten' in the past to register for class 2 when a client has a small side hustle as well as a full time job but has exceeded class 2 threshold. As you say they would be paying twice.

Woah !

They're not paying twice.

They're paying the correct amount of NIC as determined by the law. Class 1 on their employment income and Classes 2/4 on their self-employment income.

The fact that they get no direct benefit is irrelevant. Self employed folk have had no direct benefit from Class 4 NIC for over forty years.

You won't get much support from your professional body if your attitude is "Ach - HMRC didn't notice so we told the client not to bother paying."

Thanks (1)
By Red Leader
20th Jan 2020 10:08

I agree. It sounds like HMRC's NI system does not have the client as self employed. Based on the facts, this is the likely reason rather than maximum NI being paid.

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