powers of DWP?

getting_confused_2

Does anyone know if there is a statute of limitations on the power of DWP/HMRC to go back and claim NI contributions? My wife has a gap where she paid no class 2 NI but did do tax returns as self employed. She was ill and earning almost nothing - less than £500 per year and we were badly advised by what turned out to be a dodgy accountant. We now know she should have got a certificate of exemption. We are about to apply for her pension and are concerned that we will have to pay the contributions for no benefit.

aveylee

It's HMRC that deal with (non) payment of National Insurance Contributions (NICs), not the DWP.
They can generally go back either 4 or 6 years unless there was 'fraud' involved (Note what HMRC consider as 'fraud' can be wider than in a purely legal context).
If 'fraud' was involved I believe they can look back upto 20 years.

1st question though is has she had a pension forecast? If so what does it say?
By not paying NICs her pension is likely to be much less than it would have been, that may be the bigger financial loss you face.

anmarj

getting_confused wrote: »

We now know she should have got a certificate of exemption.

even if she had the certificate it does not give credits towards her state pension, so she would of been missing those years anyway

getting_confused_2

Thanks to both,
The whole thing is a mess, decision not to pay made when more credits needed for a pension and my wife, having lived abroad, didn't appear to have any chance of making the limit. Now limits are lower and time in Europe counts so we would have made a different decision. (altyhough we were a bit hard up at the time)
As far as HMRC goes I have scoured their site for answers to this. the page where the 'new' time limits of 4 years, 6 if its 'careless' and twenty if its 'fraud' are given explicitly exclude class 2 NICS. I also can't find out if there would be penalties and interest to pay.

sleepless_saver

http://www.hmrc.gov.uk/about/new-penalties/failure-to-notify.pdf

She could write to HMRC explaining why the NI contributions were not paid at the time (illness and poor professional advice received), asking to be excused the penalties and either:

offering to pay the contributions if that is still possible, if she wants them or:

asking for retrospective small earnings exception, and providing the information about her low earnings over the period.

HMRC could impose penalties, but have discretion not to where there are good reasons. But there's no way of telling in advance what their decision would be so she would be taking a risk. Of course, she'd be taking a risk by not telling them and the penalties are higher for that (see link).

getting_confused_2

Thanks Sleepless saver. In the meantime I have found a barristers opinion from a top tax chambers that says that the limit is 6 years, because NI contributions are not counted as 'tax' and are therefore subject to the normal statute of limitations on debt. As we have both been 'inactive' for over 5 years now that may apply. It is very hard, as you say, to know what view they will take and as it goes back a way we would struggle with evidence.
I think we need to do some sums on possible outcomes. What I know for certain is that any back payment made would not contribute to a pension so is 'dead money'