I have a client who retrospectively decided to pay voluntary Class 2 NIC for the 2017/18 fiscal year so that that year would count towards his State Pension entitlement.
I contacted HMRC last year when he decided he wanted to pay it and they said that it was too late to pay it via an amended 2017/18 SATR so the best way was to pay it direct into the NI office (at the current rates then of £3 per week) so he duly paid them £156.00 last November and it eventually showed up on his Personal Tax Account last week!
He has now received a letter from the NI people saying that he MAY have overpaid Class 2 NIC in error and that, IF he has, he is entitled to a refund of £108.00 (presumably 36 weeks at £3?)
The outline of his case is as follows:
PAYE employment (2 jobs) - £4,402 gross (total Class 1 NICable earnings between PT & UEL £2,001.79), Self-employment £5,703 taxable profits.
My brain is frazzled, I cannot get back to a refund of 36 weeks whichever way I look at it and the client is 'biting at the bit' to get his mits on £108.00 but the last thing I want is for him to get a refund and then that year still not count towards his State Pension entitlement!
Any help very gratefully received please as I can't see the wood for the trees at the moment!
Many thanks!
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Replies (22)
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I suspect that the Class 2 office is wondering why he's sent them a cheque for £108.
They've either lost the letter telling them why he sent it or there never was one.
Check with them whether the year counts as paid up. Nothing so comforting as having a letter on file.
I suspect that the Class 2 office is wondering why he's sent them a cheque for £108.
They've either lost the letter telling them why he sent it or there never was one.
Check with them whether the year counts as paid up. Nothing so comforting as having a letter on file.
He sent them £156.00 via their bank account as specifically requested by them and they said they would then tie it up (which took 5 months!) - the £108.00 is what they are now saying might 'possibly' be overpaid.
That year is now showing up as fully paid (as a result of sending in the £156.00 last November) so I am reticent to let him claim the money back as I am worried that the 2017/18 year will then show as 'inadequate contributions' or the like.
Possibly linked to the two PAYE jobs as well as s/e and the annual C1&2 NIC maxima? Difficult to tell from the details given, though it looks odd
Yes I agree Paul; I cannot see how he could have paid enough Class 1 to enable him to pay less Class 2 when he only paid £240.69 of Class 1 combined from the two PAYE employments in the year.
It's rubbish like this sent out from the NI office with no corresponding computations etc to show how they got their figures which wastes hours of our valuable time!
You need to see the P60s. That will show you how much income has been treated as being in excess of the Lower Earnings Limit for NI. HMRC convert that figure into an equivalent of the number of weeks of income earned at the lower earnings limit to establish how many weeks of voluntary contributions are required to make the year a qualifying year.
Yes I have one but unfortunately he left the other employment in the year so I only have a P45 for that one.
Yes I have one but unfortunately he left the other employment in the year so I only have a P45 for that one.
That's a real flaw in the system.
Just guessing, like, but was he self employed all year?
If you can't sort it yourself, I'd write to HMRC for their calc.
Or .... ask the client if he's bothered. He only needs to get 35 years in.
Yes I have one but unfortunately he left the other employment in the year so I only have a P45 for that one.
That's a real flaw in the system.
Just guessing, like, but was he self employed all year?
If you can't sort it yourself, I'd write to HMRC for their calc.
Or .... ask the client if he's bothered. He only needs to get 35 years in.
Oh he's bothered alright - he's been driving me mad all day!
The thing is he is winding down his self-employment and has 33 years towards his State Pension in the bag so this one really needs to count and then he only has another couple to notch up and he can then relax about it - which he is not doing currently!
In the 2017/18 fiscal year he worked in two PAYE jobs for about three months of the year combined and the rest was part-time self-employment giving taxable profits of £5,703.
I have sifted through the payslips that I have which make up the P45 and I think I've now got to the point where the earnings above the LEL and up to UEL are £2,987 for the year (with £2,001.79 of that agreeing with HMRC's figure of the amount between the PT and the UEL).
So this is where I'm confused - do I divide the £2,987 by £113 (the weekly LEL for 17/18) to get 26 weeks, leaving a further 26 weeks to be paid via Class 2 NIC i.e. 26 x £3 = £78??
This would then mean that my client would be due a refund of £156 pd -£78 due = £78.00 not the £108.00 they are stating or am I barking up the wrong tree totally and is it time to put it to bed for the day?!!!
Your time is FAR more valuable than this, particularly with all else that's going on, to be concerned about a client's £108. I genuinely would have told the client that I'm not going to look into it. If he insisted I'd tell him that I'd be charging him a minimum of £250 + VAT to do so.
You've spent more than £108 of time doing what you've already done.
Yeah you're right! Thanks Wanderer! The voice of reason.....
Sometimes we get so caught up in all this cr*p that we can't decide when to stop or at least I can't!
I got asked a question about what I had learned from COVID-19 and what I would do different in business going forward and my answer was to not be available for my clients 24/7 as when there was a true crisis on they somehow wanted you to give even more of yourself than that!!
If we were talking tax, yes, £108 is not worth the time, but it's about the pension record, so that £108 potentially correlates to the loss of £200+ per annum. Therefore, in this instance, it is worth the time. It might be worth a call to the NI office to check whether they are showing the year as qualifying.
]If we were talking tax, yes, £108 is not worth the time, but it's about the pension record, so that £108 potentially correlates to the loss of £200+ per annum. Therefore, in this instance, it is worth the time. It might be worth a call to the NI office to check whether they are showing the year as qualifying.
Yes, you're right Paula; I do intend following it up for exactly the reasons you give - especially as he paid the Class 2 NIC voluntarily so that it meant that 2017/18 counted towards his State Pension - but not this week as I have already expended far too much time on it!
The irony is that the client phoned the NIC office this morning who said that his record for 2017/18 was all up-to-date as he had paid 16 weeks of SE Class 2 contributions - this meant that the remaining 36 weeks could be refunded like they advised then? - oh no, apparently the letter that went out was just a generic letter than said he MAY be eligible for a rebate not that he necessarily was due a rebate! So we're still none the wiser.
The client has decided not to claim the £108 refund for the time being and I have said that I will write in to the NIC office when I have the time!
Yes that was my feeling exactly Paula.
He was keen to get a refund but now he's seen sense (probably because he realised I was starting to get irritated!)
]It is NOT worth Southwestbeancounter's time to work out how the £108 is calculated and that's what they were spending their time on. Their question was "Has my client overpaid Class 2 NIC or not?".If we were talking tax, yes, £108 is not worth the time, but it's about the pension record, so that £108 potentially correlates to the loss of £200+ per annum. Therefore, in this instance, it is worth the time. It might be worth a call to the NI office to check whether they are showing the year as qualifying.
Of course it's worth checking qualifying years for pension. That's an entirely different question and can be obtained via the normal methods or waiting NICO to send out one of their standard letters.
Absolutely.
The question is, will it cost more in fees than £108? If it will cost more, it'll be cheaper to let the £108 go, right or wrong.
Absolutely.
The question is, will it cost more in fees than £108? If it will cost more, it'll be cheaper to let the £108 go, right or wrong.
Correct Lion except, luckily for him I'm not charging in this respect :-)
To be honest, if I was I would seriously have had to consider how long I was spending on it but it's my time lost nothing more in this instance.
I will charge for the letter though as he wants me to write it and that would only be fair.
Yes agreed Wanderer and thanks for making me see sense regarding my ridiculous waste of precious time on it yesterday!
Unfortunately their 'standard letter' is their usual standard - vague and ambiguous with no computations on how they get their figures whatsoever. A letter is the only way forward which I will do when time permits.
Thank you all for your assistance.
Southwestbeancounter wrote:
Yes I have one but unfortunately he left the other employment in the year so I only have a P45 for that one.
That's a real flaw in the system.
Just guessing, like, but was he self employed all year?
If you can't sort it yourself, I'd write to HMRC for their calc.
Or .... ask the client if he's bothered. He only needs to get 35 years in.
Yes he was self-employed all year although only on a part-time basis but he didn't commence or cease in that particular year
Was he employed all year ?
I'm just clutching at straws, trying to make sense of it.
No two separate sources of employment - one for approximately a month and the other for about 6 weeks that's why it makes no sense to me whatsoever. If he was a high earner I'd get it but he's far from that
