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Why did HMRC not include Class 2 NIC?

We included class 2 NIC but HMRC didn't.

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I have a client who was both employed and self-employed during 2018/19. Her employment earnings were £17,422, taxed under PAYE, and her taxable earnings from self-employment were £22,146.

My calculation of the tax and NICs included class 2 contributions of £153, but HMRC has issued a calculation which excludes this element. The Class 4 contributions are unaffected, and neither I nor my colleagues can understand why Class 2 does not appear to apply. This client is not of retirement age.

If anyone can shed any light on this I would be most grateful.

 

 

 

 

Replies (13)

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By zxcvb
20th Nov 2019 14:39

Similar thread here that may give you some answers: https://www.accountingweb.co.uk/any-answers/class-2-national-insce-not-c...

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By SteveHa
20th Nov 2019 15:34

Your client hasn't told NICO that they are self-employed.

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Replying to SteveHa:
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By unearned luck
20th Nov 2019 23:31

Quite probably so, but NICO can also make mistakes.

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By K81
20th Nov 2019 15:56

Your tax return was amended by a computer. If NICO does not have your client noted as self-employed then HMRC computer takes the class 2 NIC out of the calculation.
Its to get the client to register with NICO.
I agree that it is a silly thing to do to remove class 2 NIC from a self-assessment tax return which clearly shows self-employment.

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Replying to K81:
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By unearned luck
20th Nov 2019 23:50

HMRC are breaking the law by programming their computer to do this. All the provisions in the TMA that permit HMRC to change a taxpayer's liability (amending obvious errors, opening & closing enquires, issuing DAs) require the thing to be done by an officer of the board.

HMRC's response to this charge has been to ask Parliament to amend the law retrospectively to permit automatic changes to taxpayers' self-assessments. Unless HMRC are to be permitted to make a correct SA into a wrong SA, this change in the law won't help them in these class 2 NIC cases.

These class 2 deletions (as opposed to correcting the NICO computer) is particularly egregious as class 2 NIC is what gives the SE the right to the state pension.

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By penelope pitstop
21st Nov 2019 01:17

Give NICO a telephone call and tell them the date the self employment started.

Also, make a note in your permanent notes of that date as well.

If you don't, it may come back to haunt you years from now!

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Replying to penelope pitstop:
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By daviddaniels
25th Nov 2019 11:58

Can you just phone them and sort it out on the phone? That would be good. Is it the NI General Enquiries number? Thanks.

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By Matrix
21st Nov 2019 04:07

I have a few of these and I haven’t rushed to get HMRC to change their records if the client is paying sufficient NI through their employment. Usually the client has registered as self employed but not with NICO so I tell them to do so but some haven’t.

It is a pain if they need a mortgage and the records don’t agree.

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By petestar1969
25th Nov 2019 11:28

I've had this a few times. Its due to the client not being registered for Class 2 as others have said.

Class 2 registration should happen automatically though when you register for self-assessment so I'm confused in this case as to how the "error" occurred.

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By ArianBloodwood
26th Nov 2019 10:51

An even simpler way to inform NICO than making a phone call is filling in Form CWF1. I usually do it for clients as part of ensuring the client is registered for S-E, but it's very simple for clients to fill out themselves too.

Filling in this form won't fix retrospective problems like Cls 2 payment made but not credited to clients NI file, or qualifying year not recorded. I have to call to get those fixed, but staff are usually very co-operative and understand the issue and how to fix it.

Here's link to Form CWF1:
https://www.tax.service.gov.uk/shortforms/form/CWF1ST?dept-name=CWF1&sub...

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By pauljohnston
26th Nov 2019 14:06

before you rush off and complete a CWF1, there could be penalties for late submission. All those we have dealt with are because of NICO inputting errors in the past.

a phone call or a quick letter stating facts normally sorts out the problem

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By L Haldane
05th Jan 2020 11:51

I had two instances of this, both relating to female clients who had been registered as self-employed and paying class 2 nic for years, but in the change over to class 2 being collected via the self-assessment system their NI No's were not mapped across onto their self assessment records due to some snag in the system caused by my client's self-assessment records being held in their maiden names whilst their DWP records were held under their married names.

The whole thing was a nightmare to resolve because HMRC's computer system somehow managed to create a second self-assessment record and UTR number for these clients. Because there are no direct lines of communication between DWP and HMRC's self-assessment department it took months to resolve these issues even after the cause of the problem was identified.

It was such a mess that HMRC didn't have a leg to stand on and had to cough up when I billed them for the hours I lost acting as the go-between relaying messages between the two departments to get the problem fixed.

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By jwgrogan
07th Jan 2020 11:15

I recently had a case where I included the class 2 NIC on the Tax Return, and HMRC duly ignored it because the client hadn't registered with NICO, but a few weeks ago they revised their calculation to include it again, without the client having meanwhile taken any action. Is this an isolated case or is there any widespread evidence that HMRC have now rectified this farcical situation for good?

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