BACKDATING CLASS 2 NI - 20.12.2016

Could your clients top up their contributions?

The First-tier Tribunal allowed a taxpayer to make good Class 2 NI contributions dating back 40 years. Why is this significant and could your clients do the same?

Missed payments

In R Thomas v HMRC [2016] TC05463 (see Follow up ), the taxpayer was unaware that he had a Class 2 NI liability from 1976 up to his retirement in 2014. He paid his tax and Class 4 NI promptly each year, but never received correspondence indicating he had failed to pay the fixed Class 2. Unfortunately, this affects entitlement to the state pension, and so he wrote to HMRC indicating a desire to pay the overdue liability and so top up his credits. HMRC refused to give him credit for payments related to periods prior to April 2008, so he appealed on the basis that his failure to pay the NI on time was attributable to his ignorance or error, but that the ignorance or error was not the result of a failure to exercise due care and diligence. This is set out in Reg 6,SI 2001/769 (see Follow up ). The Tribunal agreed, citing that his behaviour in respect of his tax and Class 4 NI demonstrated that he was a diligent taxpayer, and that Reg 6 applied.

R Thomas v HMRC [2016] TC05463

Reg 6, SI 2001/769

Class 2 NI counts towards state pension entitlement and is the cheapest way to obtain a full pension. The appeal was allowed because the taxpayer was diligent in relation to his other tax and NI payments. If your clients wish to follow suit, they need to show that there was no failure to exercise care and due diligence.

© Indicator - FL Memo Ltd

Tel.: (01233) 653500 • Fax: (01233) 647100

subscriptions@indicator-flm.co.uk • www.indicator-flm.co.uk

Calgarth House, 39-41 Bank Street, Ashford, Kent TN23 1DQ

VAT GB 726 598 394 • Registered in England • Company Registration No. 3599719