Voluntary NI retrospective 'deadline extension': not applicable for Class 2 contributions?

ww1223

My wife has been receiving her state pension for just over 2 years.  She recently received her DWP letter setting out details of her four ‘missing’ years which could be covered by voluntary contributions, in order to increase her pension to the maximum rate.

She then rang the HMRC NI helpline to get the famous 18-digit reference number to make the payment, and to confirm that this would be at the Class 2 rate for each year (she has been self-employed for many years).

The (very helpful) agent told her the self-employment status and falling below the small profits threshold checked out OK for each year, so she ticked all the boxes for Class 2 voluntary payments.  BUT she was then told that the retrospective payment ‘deadline extension’ back to 2006 did not apply to Class 2 voluntary contributions, only Class 3.  So the oldest two of her four missing years (16/17 and 17/18) now fell outside the ‘usual' retrospective limit of 6 years maximum.  But she could still make the payments for those years at the Class 3 rate (much higher of course!) if she wished.

This came as a surprise.  We’d never seen this restriction mentioned in all the online material about the deadline extension, and still can’t find any reference now we’ve looked again.  In fact quite the opposite.  

The internal ‘National Insurance Manual’ 72270, last updated just 2 weeks ago on 8 July 2024, states:

Regulation 65BA of SSCR 2001

On 14 March 2023, the time limit to pay voluntary Class 2 NICs for tax year 2016 to 2017 was extended to 31 July 2023. On 12 June 2023 the time limit to pay voluntary Class 2 NICs for the tax years 2016 to 2017 and 2017 to 2018 was extended to 5 April 2025

Thanks to that reference I was able to go right back to the legislative source of the ‘deadline extension', namely regulation 65BA of the Social Security (Contributions) Regulations 2001 para 1, which (together with its subsequent amendments) does indeed state that those specific years – the very years the agent said ’no’ to - can be paid on or before 5 April 2025.

Can anyone see a reason why the HMRC agent might after all be correct in disallowing 16/17 and 17/18 payments at the Class 2 rate?  If not, does anyone have experience in arguing such points?  I would have hoped that quoting the National Insurance Manual would be sufficient – that’s presumably the detailed rulebook the agents work from.

Apologies if this has been asked before on the Forums - I’ve found several references to Class 2 retrospective payments being disallowed, but not because of this particular (alleged) problem.

pinnks

Very strange.  I know that many, many, non-residents are paying Class 2 for those 2 years, but have not seen many cases of self-employed UK residents.  But that should not matter because Class 2, is Class 2, is Class 2 for this purpose.  As long as you meet the requirements to pay Class 2, rather than Class 3, the law about making payment is the same, as far as I am aware. 

Regulation 65BA applies equally to Class 2 and Class 3 and is headed "Voluntary Class 2 and Class 3 contributions: tax years 2016-17 and 2017-18 extension of time for payment and tax years 2016-17 to 2022-23 computation of amount"

"65BA—(1) A person who is entitled, but not liable, to pay a Class 2 or Class 3 contribution in respect of tax year 2016-17 or 2017-18 may pay the contribution on or before 5th April 2025."

Paragraph (2) sets the rate at which such NI is payable, as the rate that applied for 2022/23.

So, if the officer is suggesting that Class 2 is out of time, then Class 3 must also be out of time and we know that is not the case, so their argument fails on grounds of consistency.  Personally, I think the officer was either new, generally ill-informed, or having a bad hair day.

If they have said that she meets the general criteria to pay Class 2 for each of those years, I would challenge the position on the basis that the law says otherwise in terms of whether she can, or cannot, still pay those 2 years, even though that means hanging on the phone for an age.

ww1223

Many thanks for your encouraging comment.  Yes the whole NI/pension/topup thing is complicated, but surely it’s not so complicated that the source legislation can be interpreted to mean the exact opposite of what it says!

We’re planning the next call tomorrow (the wait’s not so bad with the phone on loudspeaker and being able to get on with something else).

Best case is she gets a new 18-digit number for a single payment for all 4 years at Class 2, to replace the two numbers she was given for separate Class 2 and Class 3 payments.

Worst case is she’s told that because a Class 3 number has already been issued for 16/17 and 17/18, she’s now lost the opportunity to pay those years at Class 2.  We’ll see …

Thanks again.

pinnks

"Worst case is she’s told that because a Class 3 number has already been issued for 16/17 and 17/18, she’s now lost the opportunity to pay those years at Class 2.  We’ll see …"

That cannot be a legal outcome.  Either there will be some legislation tucked away somewhere that overrides regulation 65BA(1), or the officer simply got it wrong.  But they cannot say that because the have issued an 18-digit number that the facts of the case, in terms of eligibility, have changed...

Good luck

ww1223

Thank you!  That comment was a bit tongue-in-cheek I must admit.  Also rather unfair I hope, since I've generally found HMRC to be helpful and reasonably logical in the past.

Scotbot

I was non resident from 2007 to 2017 and have a letter dated May 2024 outlining the class 2 contributions I can pay back to 2006/7.

pinnks

Scotbot said:

I was non resident from 2007 to 2017 and have a letter dated May 2024 outlining the class 2 contributions I can pay back to 2006/7.

Yep, I have talked with loads of people doing this and none of them have ever been told that anything like the issue in this thread...
 

ww1223

Success!  Just had the second call with HMRC NI helpline.  We barely needed to start describing, let alone arguing, the question - the new agent immediately saw that the previous advice was wrong and that all four years in fact were entitled to Class 2 payment.  New 18-digit number duly issued to make a single payment for all four years.

Thanks again for your help.  It does make you wonder how many other people might have suffered from erroneous helpline advice though, given that we came pretty close to trusting it and as a consequence paying around £1300 more than my wife was eligible to pay in order to cover those two years.

pinnks

Brilliant news , though I agree with you about how often this sort of thing occurs.  It shows the power of discussion groups like this one!

35har1old

pinnks said:

Brilliant news , though I agree with you about how often this sort of thing occurs.  It shows the power of discussion groups like this one!

As long it's your only source of income the way things are going at present 

pinnks

35har1old said:

pinnks said:

Brilliant news , though I agree with you about how often this sort of thing occurs.  It shows the power of discussion groups like this one!

As long it's your only source of income the way things are going at present 

I am not sure what you mean.  The question was about the ability to pay Class 2 NI for 2 specific years, and the outcome is that HMRC erred in their first statement on the issue.  What does your comment have to do with that?