The problem
Not normally known for their generosity, HMRC has, to the great surprise of those on the receiving end, been refunding some Class 2 NIC payments to self-employed taxpayers. It appears this is an error, caused by a technical problem with an automated process. The technical issue resulted in HMRC delaying the transfer of the NICs payments and meant that automatic refunds were given to taxpayers as the HMRC computer system could not deal with the 'late payment' issue … caused by HMRC itself.
This fine mess has been brought to the fore in the last few days by the Association of Taxation Technicians (ATT), to whom credit is due for doing so. The ATT explained the situation thus: “It appears that this year, the process which moves the payment from the self-assessment computers to the NI records was run late. The result is that some taxpayers who had paid their tax (including voluntary Class 2) by 31 January 2024 have been told that their Class 2 element was paid late and cannot be accepted. They have been issued with a revised income summary and tax calculation (SA302) rejecting the Class 2 payment and refunding the £163.80 paid.”
Why does this matter?
The reason this matters is that these refunds could have implications for future state pension and other contributory benefits entitlement. More specifically, taxpayers who have received refunds may now find a gap in their National Insurance (NI) records which could impact their entitlement to these allowances.
What should you do?
The first thing to do is to check if you have received any refund/had any Class 2 voluntary contributions returned. If you have, and bearing in mind the potential impact on your pension, you may want to pay these contributions to obtain a 'credit' for 2022-23 towards your state pension. I’m afraid this is where it gets messy. It is not possible simply to pay back the amount into your self-assessment account. Instead, you will have to phone the NI Contributions office on 0300 200 3500 to obtain a payment reference and then you’ll have make a special payment direct to them. Given HMRC’s track record with answering phones, this may require some patience…
By all means contact us if you are unsure of what you need to do. This is, we’re sorry to say, reflective of some of the ongoing problems of customer service at HMRC.
Ashley Marshall, Client Manager, M&S Accountancy and Taxation
