My tax refund is less than what I applied for!
This is mainly set up to assist HMRC with the collection of outstanding Class 2 National Insurance contributions from self employed people that still haven't paid what they owe.
Please be aware, that although HMRC can reduce your tax refund to collect this national insurance - HMRC do not always have an updated version of your Class 2 National Insurance account, therefore they could be collecting too much and deducting your tax refund by more than what is necessary. They have of course, asked the taxpayers to let them know if they don't agree the figures, but in all honesty - how are you going to know?
I had a sole trader that was being chased for Class 2 National Insurance contributions totalling just under £300! Luckily she called me to check the amount before she paid it. HMRC were asking for nearly 2 years back dated Class 2 National Insurance payments (even though she had ceased self employment during that period!). HMRC had previously been advised by letter about the date the business closed, but this letter hadn't yet been 'processed' at their end.
I re sent the letter to HMRC with a covering note, asking them to actually amend the account this time and her new national insurance bill come out at £10.80 - which was her last month's (correctly due) Class 2 NICO due before she ceased self employment.
Imagine, if she hadn't asked me to check! Imagine, that through her new employed job - she was being (incorrectly) taxed and due a refund..... Suddenly had £300 deducted from her tax refund and she was none the wiser? Definitely food for thought.
Another thing to remember with Class 2 National Insurance payments, is that the bills are (now) issued every 6 months (instead of every 3 months), so the system could show an under payment of Class 2 NICO when in fact you just haven't received your bill yet.
My advice? Complete a form CA5601 from now getting your Class 2 NICO payments paid by Direct Debit, so that HMRC's system will show the due date along with the amount to be collected (and therefore nothing under paid or due to HMRC).
Pro activity is key on this one - if it's down to the computers, not 'common sense' I have a funny feeling, tax payers are going to be cut short of their refunds!