Demand for payment of Class 2 NIC

[alisonpeters]

Hi

I am self employed, however I did not arrange to pay Class 2 NIC by DD. I now have received a bill from HMRC wanting NICs for periods covering 2010 - 2011.

During this period, I have completed 2 SA returns, both indicating a loss. My self employment is my only source of income. Do I still have to pay these NI contributions?

Many thanks

 

[Chris Ashdown]

As I understand it yes it's got nothing to do with profit or loss, everyone working should pay it

 

[Mitchells Bristol]

You can claim exception for the year in question if you made a loss. I would write to HMRC with a copy of your self-assessment return to show that you made a loss, and request an exception from the charge. You can complete form CF10 also to claim exception for later years.

 

[kevin.doran]

I would write to HMRC with a copy of your self-assessment return to show that you made a loss, and request an exception from the charge.

Agreed - I also tend to include a signed copy of http://www.hmrc.gov.uk/forms/ca8480.pdf just be be safe (obviously stating that no physical refund is due)

 

[NickMoore]

For info, you are eligible to apply for the small earnings exemption to Class 2 NI if earnings are less than £5595 (2012/13). 2011/12 was £5315 and 2010/11 £5075.

 

[Nala]

For info, you are eligible to apply for the small earnings exemption to Class 2 NI if earnings are less than £5595 (2012/13). 2011/12 was £5315 and 2010/11 £5075.

I thought you had to pay Class 2 NICs no matter what once over the threshold, even if for accounts purposes you posted a loss for tax purposes - it's not a lot anyway.

That's as I understood it anyway ?

 

[NickMoore]

"Earnings" in this context means means your taxable profit from your self-employment activities. So if you make a loss you have £0 earnings and so you are under the threshold.

 

[kevin.doran]

I thought you had to pay Class 2 NICs no matter what once over the threshold, even if for accounts purposes you posted a loss for tax purposes - it's not a lot anyway.

That's as I understood it anyway ?

http://www.hmrc.gov.uk/forms/cf10.pdf

 

[Nala]

"Earnings" in this context means means your taxable profit from your self-employment activities. So if you make a loss you have £0 earnings and so you are under the threshold.

Interesting, so the HMRC lady was telling me porkies.

 

[kevin.doran]

Speak to HMRC 3 times today and you're likely to get 3 different answers!

 

[Nala]

Speak to HMRC 3 times today and you're likely to get 3 different answers!

Yes, I'd guess you're right, they are in a bit of a state.

Oh well, it was just my start up year, not even a full year of self employment a few months only, so I'd guess it was about £45 ish that was paid - I'll let them keep it and buy a round of drinks on me.

 

[kevin.doran]

Just because you're eligible for exception, doesn't mean it's the right decision to apply for one. Remember NI gets paid for a reason...

 

[Nuno]

Just because you're eligible for exception, doesn't mean it's the right decision to apply for one. Remember NI gets paid for a reason...

This has nothing to do with the OP's question and is, to my mind, adopting a moral standpoint. Your morals might not be everyone elses', and more than one set of morals will fall within the law.

Furthermore, and probably more importantly, it is generally accepted that the income raised by NI is not an hypothecated tax, (one used for a specific purpose only), and only an extra form of income tax.

 

[kevin.doran]

This has nothing to do with the OP's question and is, to my mind, adopting a moral standpoint. Your morals might not be everyone elses', and more than one set of morals will fall within the law.

Furthermore, and probably more importantly, it is generally accepted that the income raised by NI is not an hypothecated tax, (one used for a specific purpose only), and only an extra form of income tax.

So pointing out the potential pitfalls of the OP applying for exception (i.e. not being able to draw full state pension due a lack of qualifying yrs) has nothing whatsoever to do with this topic?

 

[Nuno]

Just because you're eligible for exception, doesn't mean it's the right decision to apply for one. Remember NI gets paid for a reason...

So pointing out the potential pitfalls of the OP applying for exception (i.e. not being able to draw full state pension due a lack of qualifying yrs) has nothing whatsoever to do with this topic?

Had you phrased it as you did the second time the meaning would have been clear and the post relevant and good advice.
But you didn't.

 

[kevin.doran]

I'm not particularly interested in arguing this one out but saying 'NI gets paid for a reason' means exactly that as far as i'm concerned.

 

[Nala]

So pointing out the potential pitfalls of the OP applying for exception (i.e. not being able to draw full state pension due a lack of qualifying yrs) has nothing whatsoever to do with this topic?

This was why I was told I had to pay it once over the threshold no matter what - and which is why I queried it as another poster also seems to understand that and said they thought it was needed to be paid no matter what, and lets face it, it really is peanuts in the scheme of things.

But it seems in true UK tax and NI rules there is never a simple answer - I guess this is why there are so many accountants?