Oxford Dictionaries has declared the 2016 word of the year to be: ‘post-truth’. Bear this in mind when searching for information on gov.uk, or advising clients about what they may have read. Our tax tips this week include a number of ‘post-truth’ examples from gov.uk that could impact advice you give clients. We also have tips on how to deal with a deficiency in class 2 NIC, and some practical advice for claiming the employment allowance.
As usual we have summarised below one of the 3 tax tips we shared by email with our general practice accountant subscribers last week. Further details are in a box on the right.
Class 2 NIC back payments
From 2015/16 onwards the self-employed are due to pay class 2 NIC alongside their self-assessment. This has caused all sorts of problems with the HMRC computer.
The correct amount of class 2 NIC for 2015/16 is normally £145.60 (52 x £2.80), but in some cases the computer thinks it should be £179.40 (52 x £3.45) which is the special rate for share fishermen.
Occasionally the tax computation includes a nil liability for class 2 NIC, although the self-employed profits exceed the small profits threshold of £5,965. When questioned HMRC say the taxpayer hasn’t been registered for class 2 NIC. Where the taxpayer can prove he has paid class 2 NIC for earlier years, the HMRC position should be challenged without delay. If HMRC’s record of class 2 NIC payments for the taxpayer is incorrect he will not receive the level of state pension he is expecting.
There are taxpayers who haven’t paid class 2 NIC for many years, as the underpayment was never chased up, or they didn’t realise they had to pay class 2 and class 4 NIC. For those cases the taxpayer should be advised to pay the class 2 NIC due for as many years as HMRC will accept. This will be a minimum of six years, and the payment will generally need to be paid by 6 April 2017, but the deadline may be longer if the taxpayer is close to retirement age.
If the taxpayer has decades of unpaid class 2 NIC, look at the case of Richard Thomas. He won the right to pay voluntary class 2 NIC back to 1976 as he had been badly advised, and HMRC had not chased for payment.