I submit tax returns but im not registered for Self assessment? National insurance credits

buzzybee40

Hello, 
i need to help my dad. he has been submitting tax returns for years since 1990 using his UTR as hes self employed. 
He has a terminal illness we need to claim ESA but he doesnt have any national insurance credits as hes not formally registered as self employed so hes currently not eligible. 
I am completing the CWF1 form to confirm hes self employed. its asking me what year he started self employment, i am nervous putting the year 1990 in case he ends up with any sort of penalties for not informing HMRC - does this have any sort of repercussions?  Am i best using earlier years to avoid any of this as anything to do with the HMRC is the last thing we need. we just need help in claiming the benefit whilst he can no longer work. 
thank you 

pramsay13

Generally honesty is the best policy with HMRC.
If he's been completing self assessment returns since 1990 they will be aware. 

Bookworm105

Did he genuinely never earn enough to go over the compulsory NI SE threshold so that the tax return took SE NI from him?

Obviously he cannot expect to now declare he should have been paying SE NI for the last 34 years and not expect to be penalised if he actually has not paid any. if that is the case then don't make it worse by making false declarations as to when he started as SE.
HMRC appear to know he has been earning SE income, and presumably paying SE income tax on his profits or has he hidden the source of his income for income tax purposes?

There is also a time limit for how far back you can go when making voluntary NI payments anyway

[Deleted User]

buzzybee40 said:

Hello, 
i need to help my dad. he has been submitting tax returns for years since 1990 using his UTR as hes self employed. 
He has a terminal illness we need to claim ESA but he doesnt have any national insurance credits as hes not formally registered as self employed so hes currently not eligible. 
I am completing the CWF1 form to confirm hes self employed. its asking me what year he started self employment, i am nervous putting the year 1990 in case he ends up with any sort of penalties for not informing HMRC - does this have any sort of repercussions?  Am i best using earlier years to avoid any of this as anything to do with the HMRC is the last thing we need. we just need help in claiming the benefit whilst he can no longer work. 
thank you 

Has he declared his self-employed income on the returns or is the sole issue the fact that he has not completed a CWF1? 

What does his person tax account show with regard to his National Onsurance record?

[Deleted User]

Bookworm105 said:

Did he genuinely never earn enough to go over the compulsory NI SE threshold so that the tax return took SE NI from him?

Obviously he cannot expect to now declare he should have been paying SE NI for the last 34 years and not expect to be penalised if he actually has not paid any. if that is the case then don't make it worse by making false declarations as to when he started as SE.
HMRC appear to know he has been earning SE income, and presumably paying SE income tax on his profits or has he hidden the source of his income for income tax purposes?

There is also a time limit for how far back you can go when making voluntary NI payments anyway

And the clock is ticking. 

 You have until 5 April 2025 to pay voluntary contributions to make up for gaps between April 2006 and April 2016 if you're eligible. After 5 April 2025 you'll only be able to pay for voluntary contributions for the past 6 years.

buzzybee40

he has declared his income on his tax returns, i think its solely the fact he hasnt notified hmrc hes self employed which he thought they already knew since he was submitted tax returns and registered for a UTR. His income has always been below the threshold to pay National Insurance. 
His national insurance records show "not full years" prior to becoming self employed. Hes not been hiding his income. his income is generally very low, around £7k. when hes done his tax return his receives a tax calculation in the post saying he doesnt owe any tax/NI Contributions to pay.... 
what on earth do i do in this situation. 
is simply completing the CWF1 form does the trick or will it trigger all sorts from HMRC. we dont have the energy to deal with HMRC with my dads cancer diagnosis, but he needs the credits to receive the esa. 

RAS

If he's not earned enough to pay NI, the option would have been to pay voluntary contributions. I'm aware of other people who didn't do this. They can't claim ESA but can claim non-contributory UC and PIP.

[Deleted User]

A CWF1 was solely for registering for Class 2 contributions (now abolished). Class 2 was compulsory and, broadly, was earmarked as counting towards one’s state pension and other benefits. This was a separate payment to be made by the self-employed, usually by direct debit, which does not appear anywhere on the tax return.

There were no major repercussions of not having completed a form CWF1 - the ‘fine’ for non-payment was to charge at the current rate as opposed to that in force at the time. I wouldn’t worry about it. 

 I cannot see how the completion of this form now (if it still exists) can be of benefit. 

The only option available is to enquire how to redress the issue of years that are not ‘full’ bearing in mind the time limits that I stated above. 

https://www.gov.uk/pay-voluntary-class-3-national-insurance

Bookworm105

[Deleted User] said:

The only option available is to enquire how to redress the issue of years that are not ‘full’ bearing in mind the time limits that I stated above. 

https://www.gov.uk/pay-voluntary-class-3-national-insurance 

except that it appears OP's father is looking to claim (contribution based) ESA
you cannot purchase an ESA credit by paying Class 3 voluntary contributions.
see here: National Insurance: introduction: What National Insurance is for - GOV.UK (www.gov.uk)

In Op's context of many years of self employment only, his only route to ESA entitlement will be where there is a (class 2 SE) NI credit registered 
New Style Employment and Support Allowance - GOV.UK (www.gov.uk)
OP states that father was declaring income of £7k but not paying NI
that should mean he has a Class 2 NI credit as he falls into the bracket of earnings high enough to give a credit but too low to require an actual cash payment of tax.

sadly the NI record "not full" may not accurately reflect that distinction and thus it may not become clear until he attempts to make an ESA claim 

Op's statement that 

 buzzybee40 said:
His national insurance records show "not full years" prior to becoming self employed. 

his income is generally very low, around £7k

is also a bit confusing since if he is trying to fill pre SE years then registering as SE is irrelevant.

you can back fill Class 2 NI by making the correct payment on a voluntary basis (I have done so myself) but the number of years you can go back is severely limited.
A Class 3 voluntary contribution allows going back further, but that won't get an EIS credit, and is a lot more expensive so is probably pointless.

if he has "not full" SE years then that needs further investigation because it would appear you are not familiar with how Class 2 SE NI operates. There are 3 earnings thresholds for Class 2 NI. In simple language they are:
a) too low - nothing payable, and nothing credited
b) high enough for a credit (earnings between a - c) without actually having to pay Class 2 NI 
c)  above payment threshold - you have no option but to pay the Class 2 NI 

"around £7k" would fall in category b, so he should have an ESA credit for that tax year and therefore no need to make a retrospective physical cash payment for that year

i suggest OP needs to speak to a benefits expert - perhaps try Citizens Advice Bureau