HMRC accused of adding errors to self-employed tax returns

According to reports, HM Revenue & Customs (HMRC) is creating errors within the tax returns of self-employed individuals who subsequently don’t pay enough National Insurance contributions (NICs).

The errors relates to the National Insurance system announced by the previous coalition government. Since April 2015, self-assessment tax returns have been used as a vehicle to declare Class 2 NICs. Prior to this, they had been paid directly to HMRC via direct debit.

The cost of Class 2 NICs - £2.80 per week – is meant to be paid by all self-employed individuals and partners within partnerships, counting towards state pension and maternity or paternity leave payments.

However, many self-employed taxpayers have stated that when they submitted tax returns online and via paper-based methods – which correctly recorded their Class 2 NICs – HMRC is ‘correcting’ such returns by removing the Class 2 NIC liability, because the ‘self-assessment system does not expect it to be paid’.

Frontline staff at HMRC have already acknowledged the oversight to many accountants, blaming it on a “technical fault” with HMRC systems and has been “reported internally”. Initially, HMRC denied the issue, but later admitted the corrections had affected only a “handful of people”.

It’s important for all self-employed taxpayers to look out for the ‘correction’ made by HMRC and not simply assume that the removal of NICs from their return is correct.

Taxpayers require 35 years of consistent NICs in order to be entitled to the full state pension.

Class 2 NICs are due to be abolished from April 2018, with all future self-employed contributory benefit entitlement to be accessed via Class 4 NICs.

Self-employed individuals with profits below the Small Profits Limit will be able to access Contributory Employment and Support Allowance via voluntary Class 3 NICs that are currently £14.10 per week. Provision will be offered to self-employed individuals with low profits during the transition.

If you require help with your tax and small business needs, call our friendly team today who will be happy to arrange an appointment at your local TaxAssist Accountant office on 01249 848121.


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Last updated: 23rd March 2017