Some of you will have noticed a new section on our Individual Self Assessment tax return screen for the year 2015-16. These are on the Tax Calculation Summary (SA110) tab in a group entitled “HMRC Digital Tax Account central values”. There is a box for “Total Class 2 NICs Due” which must be completed for anyone who is self-employed, a Lloyd’s underwriter or a partner of a partnership and another box for “Total Class 1 NICable earnings between the PT (Primary Threshold) and UEL (Upper Earnings Limit)” which must be completed for anyone who is employed. Please note that these new boxes do NOT appear on the actual HMRC printed forms but they are used in the tax calculation and submitted to HMRC during the submission process.
These new boxes are the beginning of HMRC’s Making Tax Digital programme and form part of the tax calculation and submission for the tax year 2015/16. However, to work properly, the HMRC Digital Tax Account (DTA) Application Programming Interface (API) needs to be available in a live state. Currently, the HMRC DTA API is only available as a test service to a select number of software developers, which includes BTCSoftware.
The current statement from HMRC is that the DTA API will be live for Tax Agents sometime in August but that isn’t set in stone. When live, our product will automatically query the HMRC DTA, obtain the required figures for Class 2 and Class 1 NIC and perform the calculation without fuss. We already have this working in the test environment but that’s no use for live submissions.
As soon as we knew that HMRC wouldn’t have the DTA API live in time for April 6th 2016 we enquired as to how we should proceed with this. Their advice to us, as it was to all of the private beta developers, was to provide manual entry boxes for the Class 2 and Class 1 NIC boxes, and also for the new Marriage Transfer Allowance boxes (the MTA boxes will also come from the DTA in time, but they are not part of the current test program so will not be live in July, more on that below).
This leaves you, the Agent, with the problem of where to get the required information for the manual entry boxes. Whilst we believe that HMRC should have contacted you to explain all of this, we have taken it upon ourselves to offer some constructive advice to assist you. We normally shy away from “tax advice” because that’s not our job. With that in mind, whilst we believe the following to be correct, we accept no responsibility for your reliance on the same.
If you have a 64-8 filed for your clients, it should be possible to get the information via the Agents Dedicated helpline for SA and PAYE (0300 200 3311) or from your HMRC Agent Online Services account. For the latter, log in to your HMRC account and navigate to the Self Assessment service. Select the client concerned and you should be taken to a page entitled “Your current client”. Within the section “File a return for 2015-16” you should see a link “Information to help complete your tax return”. Click that link and the resulting page should have entries for “Total Class 2 NICs Due” and “Total Class 1 NICable earnings between the PT and UEL”. These are the figures that need to be entered into our respective manual entry boxes.
If you don’t have a 64-8 for a given client but that client has their own HMRC account, they will be able to navigate to a similar page and provide you with the information. Note, we do not recommend that you log in to your client’s HMRC account on their behalf. HMRC are starting to track this and take a dim view of Agents who work this way.
However, there may be an issue with this approach. At the time of writing (7th April 2016), we are yet to see a figure against the “Total Class 1 NICable earnings between the PT and UEL”, all we’ve seen is “Not Available”. Also, if you don’t have a 64-8 for your client and the client doesn’t have their own HMRC account, neither of you will be able to get to that information page anyway. When that is the case, you will need to try to calculate the figures manually, or wait for the HMRC DTA API to go live.
Calculating Total Class 2 NICs Due
This is normally £2.80 per week, or £145.60 for a full 12 months. If your client commenced or ceased self-employment part way through the tax year, or turned 16 or became of retirement age during the year, this figure will be lower. If your client has total profits of less than £5,965 and you haven’t ticked the box to voluntarily pay Class 2 NICs, then the client doesn’t have to pay Class 2 NICs and this is automatically taken into account during the tax calculation in our software. Similarly, if the client is also employed, thus paying Class 1 NICs, and they exceed the Class 1 NIC maximum, the Class 2 NIC contribution is not required and again this is automatically taken into account during the tax calculation in our software.
Note that a slightly higher Class 2 NIC weekly rate of £3.45 applies to Share Fishermen whilst the rate for Volunteer Development Workers is £5.60 a week.
Calculating Total Class 1 NICable earnings between the PT and UEL
This is the total Class 1 NICable earnings between the Primary Threshold (PT) of £8,060 and the Upper Earnings Limit (UEL) of £42,385. For a client who has had a single employment during the tax year, the required figure can be calculated from information on the client’s P60 in the “National Insurance contributions in this employment” section. The “Total Class 1 NICable earnings between the PT and UEL” should be the sum of the figures in the columns entitled “Earnings above the PT up to and including the Upper Accrual Point (UAP)” and “Earnings above the UAP, up to and including the Upper Earnings Limit (UEL)”.
For clients who had more than one employment in the year, or perhaps left an employment during the year and became self-employed or unemployed, the Total Class 1 NICable earnings between the PT and UEL can only be obtained from the HMRC Agent Dedicated helpline or online accounts.
Marriage Transfer Allowance (MTA) – New for 2015/16 Tax Year
In 2016/16 and later years, it is possible for one party to a marriage or civil partnership to make an election forgoing a portion of their personal allowance and transferring it to the other party. For 2015/16 the transfer is a set £1,060 and in later years it will be a maximum of 10% of the basic personal allowance. HMRC’s expectation is that the existence of an MTA election between two parties will be made available to tax software via the DTA API. However, this feature isn’t even in test yet so is nowhere near being live. To get around this, we have provided more manual entry boxes both on the Tax Calculation Summary (SA110) tab, and mirrored on the Tax Return (SA100), Student Loan, Child Benefit and Marriage Allowance tab. These boxes allow you to specify that your client wishes to take advantage of the MTA. Note that it is important that both sides of the transfer are properly completed because if the transfer isn’t registered correctly, HMRC have the right to withdraw the election even after the tax return submission has been accepted by HMRC. We recommend that you read the SA150 notes carefully when completing the MTA section.
Please note that the Marriage Transfer Allowance is NOT the same as, nor does it replace, the Age Related Married Couples allowance which is still claimed by completing the relevant boxes on the Additional Information (SA101) tax return pages. Also note that you cannot claim both the MTA and the Age Related Married Couples allowance.
Further Information
If you need further information regarding the above then please contact the HMRC Agents Dedicated helpline for SA and PAYE on 0300 200 3311, or the HMRC Online Services helpdesk on 0300 200 3600.
