We covered the issues with class 2 NIC in our newsletters on 1 March and 16 August 2018, and 23 March 2017, but problems with corrupted NIC records and incorrect payments/repayments persist.
You will recall that the chaos started for the 2015/16 tax year when class 2 NIC began to be collected alongside self-assessed income tax, as we reported on 8 December 2016.
The root of the difficulties appears to be the legacy computer system (NPS) that holds taxpayers’ NIC records. This is a separate database to the SA system, and changes made on the NPS overwrite the data on the SA computer, not the other way round. When the NPS loses a taxpayer’s record (for numerous tedious reasons), the SA computer thinks that no class 2 NIC is due and refunds any class 2 paid. If this has happened to our self-employed clients we will need to ring the national insurance helpline: 0300 200 3500 and get the taxpayer’s record reinstated on the NPS. If the client has missed paying class 2 NIC for the years 2015/16 to 2017/18 you need to arrange to pay the class 2 NIC outside of self-assessment.
When a taxpayer first registers for self-assessment using the online form CWF1 their details should be added to both the NPS and the self-assessment computer. Do not resubmit the form CWF1 in an attempt to update the self-employment record, that will only cause confusion.
To inform both HMRC computers that the taxpayer has ceased self-employment use the online form. A notification of cessation of a trade entered on the SA tax return will not amend the NPS, and will probably be ignored for SA purposes as well.
Written by the Tax Advice Network