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NI Class 2 backpayment with Small Earnings Exception certificate

Discussion in 'Accounts & Finance' started by tagq2, Mar 19, 2011.

  1. tagq2

    tagq2 UKBF Newcomer Free Member

    Posts: 1 Likes: 0
    Hi all,

    I have been registered self-employed for the past few years to cover a small amount of earnings. I have a Small Earnings Exception certificate for this and do not pay Class 2 voluntarily.

    I recently contacted HMRC about paying a 2004/5 NIC gap where I had no other earnings. Since I was registered self-employed during the whole of that tax year, I was told that I could pay Class 2 for that year in arrears by writing to them and asking for the certificate to be cancelled for the relevant 52 weeks - they would then raise a bill at the current rate and I could pay it, allowing that year to qualify for Basic State Pension purposes.

    This surprised me, but it's a lot cheaper than paying Class 3, so I wrote to them and made clear that I would like to proceed on this understanding.

    I called up to check progress. The assistant told me that while the request had not been responded to yet, in fact I was not able to pay Class 2 NI "at my convenience" and that, if I had a SEE certificate, I could only make up for a shortfall via the more expensive Class 3. What is more, the assistant explained that I can only start contributing Class 2 from the date I sign a statement wishing to do so - no backpayments.

    However, that advice itself seems to conflict with the wording of my (latest) SEE certificate, which states, "Please note that if you were granted exception from the beginning of a tax year and are solely self-employed, you may wish to backdate payment of Class 2 NI contributions to ensure you have a fully qualifying year for benefit and pension purposes." While that wording does not confirm that I can backdate _6 years_, it seems to suggest that I can do more than 0 days of backdating.

    This seems to give three possibilities when holding an SEE certificate:
    (1) I can pay voluntarily up to a full 6 years ago, as the first asssitant advised, although it would probably be at the current rate;
    (2) I can backdate payment for some period, suggested by the wording of the SEE certificate, but not for a full 6 years;
    (3) I can't backdate payment at all.

    (3) seems to mean that I have to anticipate before the start of the tax year if I'm likely again in that year not to make sufficient BSP-qualifying NI contributions by any other method, so I can start paying voluntary class 2 before the first Sunday of the tax year.

    I guess the worst case scenario is that they'll raise a bill and then declare the contribution invalid for pension purposes anyway, and because the debt isn't actually 6 years old the 6 year Statute of Limitations doesn't apply. Hopefully the wording of my letter makes it clear that I only want them to proceed if the advice as I understood it was correct.

    Does anyone know what my actual position is? Thank you for reading.