Never paid NI class 2 in 11 years of trading

mgmgrand1

Please could someone advise me on the consequences of this! I fear a prosecution and don't know what to do. It is 100% my responsibility but didn't know class 2 existed until this weekend!!!

I have been self employed for 11 years. Kept excellent book keeping and always filed on time and I thought my NI contributions were class 4. I have a new accountant and she has asked me about my class 2 contributions! I know what they are now but I am in a bit of a mess!

Any advice or what my punishment will be? Having a criminal record will ruin my career.

Thanks
MGM

sofaspud1234

Very strange! I have been self employed for around a year now and after my accountant submitted my accounts, I automatically received a bill for class 2 NI from HMRC.
Sorry, I don't have any answers someone will advise you.

PlutoinCapricorn

Someone else reported this oversight recently, and it raised the question of why HMRC did not pick this up.

Have you moved frequently? Are you sure that you have not got a Direct Debit somewhere that has been running all these years? Did you ever claim exemption on the grounds of small earnings?

It is always possible to make up 6 years' NI shortfall with Class 3 NI. You will not have a criminal record, and if you can prove that HMRC never sent you any request for payment there may not be penalties.

PlutoinCapricorn

I am not sure what happens when people register as sole traders today, but around 10 years ago you got a welcome letter with the UTR, a black book with useful information and a Direct Debit Form for the Class 2 NI and a form for claiming exemption on the grounds of expected low earnings. Can you remember getting all this? I think that people who did not take up either of these options got bills for Class 2 NI.

There must be a glitch somewhere if HMRC know you exist and are filing returns and paying tax due but have never asked for Class 2. Do you get postal reminders to file a return each year?

mgmgrand1

Hello

Thanks for the replies. My first year of trading I profited very little so whether that exemption has carried on, I am not so sure.

I do get letters from HMRC and reminders to return and even a business records check this year. I had to submit early this so I could get a a new mortgage but still have letters reminding me to return but nothing in relation to Class 2 or bills or reminders. Nothing on my online government gateway.

I understand I'll have to back date it. I just hope I don't incur the £100 fine for each year I haven't paid and interest on top. Worse case is prosecution.

mgm

PlutoinCapricorn

Class 2 is something you pay to qualify for certain benefits. It hurts you most if you do not pay them. Normally, a certificate of exemption lasts a few years then HMRC ask you to re-claim if you want to.

This is an extremely busy time of year for HMRC: I would wait a while then phone them. It sounds like their fault. They will not prosecute, and if you can show that it is their fault there may be no interest. It is not the same as not paying income tax.

Pennywise

HMRC is only an "umbrella" agency that has lots of different departments within it and haphazard links between them. These days, a new S/E registration will indeed notify the tax side and the NIC side of HMRC, but in years gone by, when the departments were completely separate and under separate Whitehall departments, there'd be even less links. I suspect that you registered at a time when the different departments didn't talk to each other at all, or even when they weren't even under the same HMRC umbrella. When you registered for tax, there may have been an application included in the pack to register for NIC or maybe just a letter nor note to tell you to do it - easy to miss. I've certainly had a fair amount of clients over the years who've been in the same position, of somehow falling between the cracks. Good to say that now HMRC have got their act together more, it would be harder to happen today. In the other cases I've had, the answer has been to back-pay voluntary contributions to try to repair the NIC record - I've never had them getting aggressive about it and demanding fines or penalties etc.

If you want to contact them about it, I'd suggest you phone their NIC department 0300 200 3505 rather than their general helplines which will be their tax departments, not their separate nic departments.

https://www.gov.uk/government/organisations/hm-revenue-customs/contact/national-insurance-enquiries-for-the-self-employed

mgmgrand1

Thank you. I'm a bit lessed worried now(until the reality of a back payment). I'll wait until Monday of the 2nd working week of Feb and keep you informed of my progress.

mgm

mgmgrand1

I'm 32 so if I could voluntary back pay 6 years now(I'll take this out of my pension fund) then hope that I won't be to too affected in years to come.

zygurat789

mgmgrand1 wrote: »

I'm 32 so if I could voluntary back pay 6 years now(I'll take this out of my pension fund) then hope that I won't be to too affected in years to come.

You will have to pay all the years that you have missed but, a few years ago, the older years did not qualify for benefits, including pension, but I don't know if this is still the case.