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image of Oops graphic | accountingweb | HMRC wrongly refunding some voluntary Class 2 NIC payments
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HMRC refunds voluntary NIC payments by mistake

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A processing error means that HMRC has wrongly refunded some voluntary class 2 national insurance contribution payments to taxpayers.

30th Apr 2024
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Some self-employed taxpayers who made voluntary class 2 national insurance contributions (NIC) by 31 January 2024 may find they have an unexpected gap in their national insurance (NI) record, reducing their entitlement to state pension, due to an HMRC processing error. 

The requirement to make voluntary contributions was changed from April 2024, as announced in the Autumn Statement in November 2023, however the mix-up relates to the 2022/23 tax year.

For 2022/23, self-employed taxpayers with profits above £12,570 had to pay class 2 NIC of £3.15 per week, £163.80 for the full year. Those with profits between £6,725 and £12,570 were not required to pay class 2 but the year still counted for their contributory benefits entitlement. 

Those with profits below the small profits threshold of £6,725 could make voluntary payments of class 2 NIC in order to secure their entitlement to certain contributory benefits. These include the state pension, maternity allowance, and employment and support allowance.

Late running

It would appear that for the last group the HMRC process that moves these voluntary payments from the self assessment (SA) computers to the taxpayer’s NI records was run late following the 31 January 2024 deadline, resulting in the class 2 payment being rejected. 

This means that although the payment was made on time by the taxpayers, it was subsequently refunded and the year is not counted towards their qualifying contribution years.

The issue was first flagged by concerned agents on the HMRC agent forum and escalated to the Association of Tax Technicians (ATT), with members reporting that some of their clients, whose self assessment returns and payments had been submitted on time, had been issued with a revised summary and tax calculation rejecting the class 2 payment. 

The message on the SA return reads: “I have corrected your self assessment because you did not pay the class 2 national insurance shown on your tax return. You can find out how to pay this at www.gov.uk/voluntary-national-insurance-contributions.”

Refunded voluntary contributions

The ATT has contacted HMRC for further information, and HMRC says it is looking into the issue. In the meantime, the ATT has advised its members to check whether any clients who have voluntarily paid class 2 NIC for 2022/23 have had the payment refunded. 

Helen Thornley, technical officer at the ATT told AccountingWEB: “The issue of refunded voluntary contributions was raised by a number of agents on the agent forum and escalated by the ATT to the issues overview group earlier this year as an issue likely to affect a number of people with longer-term consequences. 

“Based on the information we have received to date, this appears to be a processing error at HMRC’s end, which has affected payments for self assessment made between 20 December 2023 and 31 January 2024.

“Our main concern is that the unrepresented will not understand what has happened. The letters say that they didn’t pay on time, when they did, and the process to correct the position is time consuming.

“We would like to see HMRC either see if an automatic fix was possible, or at least contact those affected to explain in more detail what has happened and how to correct the issue.”

Hanging on the telephone

This news will dampen the excitement around the launch of HMRC and the Department for Work and Pensions (DWP)’s new online voluntary NI payments tool, particularly as the tool is not available to the self-employed, so cannot be used to repay the wrongly refunded class 2 NICs.  

Unfortunately, the only option available to remedy the situation is to phone the NI contributions office, obtain a payment reference and make a special payment. It is not possible to make an online payment via the new tool or on the self assessment account.

In true HMRC style, the lines are currently very busy, with average wait times of 20 minutes according to the pre-recorded message. Our readers don’t need to be reminded that wait times on HMRC’s phone lines are usually far in excess of the optimistic “average” times offered.

An HMRC spokesperson said: “We apologise to those affected and are working to resolve this issue as a matter of urgency.”

Replies (11)

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By FactChecker
30th Apr 2024 17:26

Must be time for another one of my naïve questions ...

If a taxpayer makes an error (wrong calculation, omitted item, late submission, insufficient payment or whatever) then the onus is on that taxpayer to rectify the error;
so why doesn't the same logic apply when it is HMRC that has made the error?

Answers on a postcard to Meg Hillier, please.

Thanks (7)
Replying to FactChecker:
RLI
By lionofludesch
30th Apr 2024 18:14

FactChecker wrote:

Must be time for another one of my naïve questions ...

If a taxpayer makes an error (wrong calculation, omitted item, late submission, insufficient payment or whatever) then the onus is on that taxpayer to rectify the error;
so why doesn't the same logic apply when it is HMRC that has made the error?

Answers on a postcard to Meg Hillier, please.

These people are so arrogant.

Thanks (1)
Jennifer Adams
By Jennifer Adams
01st May 2024 09:24

Not sure who lionfludesuch is referring to .. presume HMRC rather than FactChecker? :-)

I have a couple of clients in this position and have written to HMRC pointing out that the clients paid ontime. I took a screenshot of HMRC page showing the date of payment (pre 31 Jan) and wrote. No response as yet.

Writing is proof in any future query. It's quicker typing and more cost effective writing a letter despite the increase in postal charges than waiting an hour on the phone.

But on another point.. this mistake is not funny. I presume that the computer is telling the NIC people that the year wont count towards the clients state pension? Some of my clients cant afford to lose that year in their records.

The Institutes need to bring this point up with HMRC. I know clients can check their record of years counting towards the state pension however, many havent a clue how to do so and assume they will get the full amount when the time comes.

As Amy says .. its the unrepresented that will lose out.

Thanks (3)
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By Jane Wanless
01st May 2024 09:29

I queried my "shortfall" in NI contributions yesterday. Apparently, I'd "only" paid 52 weeks of class 2 contributions so had a 3 week shortfall. I asked if this was correct as I'd not been aware that there were 55 weeks in 2022/23. The adviser couldn't see my issue and passed me to another adviser who agreed there should be 52 weeks in a year but wasn't sure how to put the record right.

Thanks (1)
Replying to janewanless:
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By petestar1969
01st May 2024 13:18

Yes 2022/23 was an odd year. I have recently done accounts for clients straddling 5 April 2023 who have weekly payroll and there were 55 weeks' of wages... very odd.

Thanks (0)
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By Damon Williams
01st May 2024 09:33

Business as usual over at HMRC again!

Thanks (0)
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By monkeypuzzle
01st May 2024 09:50

Roll on MTD for income tax (rolls eyes)

Thanks (5)
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By monkeypuzzle
01st May 2024 09:50

Roll on MTD for income tax (rolls eyes)

Thanks (0)
x
By rockallj
01st May 2024 15:26

Can HMRC not even get the basics right?

Thanks (0)
Morph
By kevinringer
03rd May 2024 14:40

I have several clients affected, including one that GOV.UK says paid on 30 January. I reported this on the Agent Forum before I was expelled, so don't know whether there are any updates on it. A point that is being missed is that these voluntary contributions are usually paid by taxpayers who have very low income (or at least very low earnings), and therefore are the least able to afford to pay their accountant to fix this HMRC mess. It is a HMRC mess. HMRC should fix it and compensate every taxpayer for the extra stress and costs the taxpayer has incurred.

I believe that HMRC is being run less by tax people and more by IT people. The potential for this HMRC mistake has occurred every year since Class 2 was switched to SA in 2015-16, but it didn't happen in 2015-16. Why? My guess; in 2015 there were more HMRC tax people involved in these processes compared to 2024, which is why the HMRC of 2024 is making mistakes that the HMRC of 2015 didn't. Given the general direction of HMRC towards digital, I fear the understanding of tax within HMRC will reduce even further, and HMRC will make more mistakes.

HMRC may have decided this particular problem will go away because of the abolition of Class 2. But the option to pay voluntary Class 2 will remain.

Thanks (2)
Replying to kevinringer:
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By FactChecker
03rd May 2024 20:24

"My guess; in 2015 there were more HMRC tax people involved in these processes compared to 2024, which is why the HMRC of 2024 is making mistakes that the HMRC of 2015 didn't. Given the general direction of HMRC towards digital, I fear the understanding of tax within HMRC will reduce even further, and HMRC will make more mistakes."

100% agree ... it's like taking your car to a garage now and finding (unless it's a village garage where 'old Joe' still gets his hands dirty) that no-one has a clue about how the car works - or indeed what to do beyond plugging in the diagnostic machine and waiting to be told what to do by the digital readout.

It is quite literally becoming just a 'numbers game' ... in that the concepts of accuracy, compliance, integrity and even humanity are being swept away to be replaced by the 'efficiency' (aka cheapness) of digital automation ("AI and away" as the Lone Ranger might have put it) - where 95% is a target not a failure.

Thanks (3)