Class 2 NIC demand
Discussion
I've been doing some self employed work, as a sideline to my main job, for the last 5 years or so. Had enough of it so ceased and notified HMRC online that I am no longer self employed since the 5th April 17. Now I've just had a letter from them demanding payment of what looks like class 2 NIC (£2.85/week) for my entire time of self employment. This is the first time they've contacted me to say that I owe anything.
My self employment income has always been small (less than £2k/yr), and I thought that being under the 'small profits threshold' (seems to be about £6k/yr) gave me an exemption from class 2 NIC? Should I have notified them voluntarily (I might have done so when I first started, as I never expected to reach the threshold)? Guidance on the internet doesn't seem to suggest so. I've always filed my self assessment returns on time, so HMRC know that my profits are below the threshold, so why are they now demanding I pay them? And why haven't they asked for it before now?
Any advice before I contact them about it?
My self employment income has always been small (less than £2k/yr), and I thought that being under the 'small profits threshold' (seems to be about £6k/yr) gave me an exemption from class 2 NIC? Should I have notified them voluntarily (I might have done so when I first started, as I never expected to reach the threshold)? Guidance on the internet doesn't seem to suggest so. I've always filed my self assessment returns on time, so HMRC know that my profits are below the threshold, so why are they now demanding I pay them? And why haven't they asked for it before now?
Any advice before I contact them about it?
In theory, you were supposed to contact them BEFORE you started any self employed income telling them that you were expecting your self employed income to be below the lower earnings threshold.
What you need to do now is prove to them that at no point during the five years you had self employed earnings that for each relevant tax year they were below the lower earnings threshold for each tax year.
What you need to do now is prove to them that at no point during the five years you had self employed earnings that for each relevant tax year they were below the lower earnings threshold for each tax year.
Thanks Eric. Guidance on the internet (Tax Aid) states that it isn't necessary to claim an exemption in advance. However, I do remember looking into this/dealing with it when I first commenced self employment. And I have found a pdf copy of the CF10 form that I downloaded at the time. I have a feeling (but no proof), that I sent a copy to HMRC years ago. If I hadn't done that, presumably they'd have been hounding me for class 2 NICs from day one?
Bit of an update on this - I phoned the NI team and they looked at my tax return figures, agreed it was fine and that they would waive the Class 2 NIC demand. Got a letter a week later confirming it, as promised. Thought all was good until I tried to log into their website and complete my 2016/17 self assessment return online. Apparently I've already submitted it (no I haven't)! Of course all the options to view it/amend it, download the SA302 lead to error messages.
Cue another phone call, this time to the self assessment assistance dept. They started off by telling me it was because I didn't need to do a SA return, until I explained my situation, and he agreed that I did. But they couldn't work out what the NI team had done. It sounds like they've effectively bodged my SA return, on my behalf, and now it's all locked down. They're investigating but it could take up to a month to fix it apparently. Glad I didn't leave it til 11pm on the 31st Jan to do this return (like usual)!
Cue another phone call, this time to the self assessment assistance dept. They started off by telling me it was because I didn't need to do a SA return, until I explained my situation, and he agreed that I did. But they couldn't work out what the NI team had done. It sounds like they've effectively bodged my SA return, on my behalf, and now it's all locked down. They're investigating but it could take up to a month to fix it apparently. Glad I didn't leave it til 11pm on the 31st Jan to do this return (like usual)!
HMRC sometimes take it upon themselves to decide that a Self Assessment return isn't necessary.
In law, they don't really have the power to do this. If a taxpayer knows they should be completing a tax return but HMRC decide that they shouldn't, it's the taxpayer's fault if they fail to submit the return - and fines and penalties will be levied.
In law, they don't really have the power to do this. If a taxpayer knows they should be completing a tax return but HMRC decide that they shouldn't, it's the taxpayer's fault if they fail to submit the return - and fines and penalties will be levied.
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