Student Employment and Tax Codes – your questions answered
Employers have raised a number of issues about the tax coding arrangements when they employ students. The following list of frequently asked questions should give you the information you will need when you employ a student.
What happens when a student has completed a P38(S) and their holiday earnings go over the Earnings Threshold?
When the earnings of a student who has previously signed a P38(S) start to go over the Earnings Threshold, you must send us form P46.
We advise you to ask the student employee to complete the P46 and show the original start date of the employment, not the date the threshold was exceeded. Where the employee completes Statement A or B, you should use code 0T week1/month 1. As this differs from the code that the P46 asks you to use, make sure you make an entry in the ‘Tax Code Used’ field on the P46 - see Employer Helpbook E13 Day-to-day payroll . Where Statement C is completed, you must use code BR week 1/month 1.
At the end of the tax year, the P14 needs to show the total earnings in this employment during the year, including earnings for the period when the P38(S) procedures applied and, for example, only National Insurance was being deducted.
What if a student, having completed a P38(S), then continues in the employment into term time?
As soon as this happens, you need to send a P46. Again, it should show the date the employment started (not the date the academic term began). In Statement A or B cases, emergency tax code, on a non-cumulative basis, should be used (tax code 543L week 1/month 1 for 2008-09). In Statement A cases you will also need to complete the tax code used field (from April 2008 there will be a week 1/month 1 space). Where Statement C is completed make sure that you use code BR Week 1/Month 1.
At the end of the tax year, the P14 needs to show the total earnings in this employment during the year, including earnings for the period when the P38(S) procedures applied and, possibly, only National Insurance was being deducted.
What happens where a student starts a holiday job with the expectation that the employment will continue beyond the holiday period?
If the student’s job is expected to continue beyond the holiday, the P38(S) is not appropriate and the P46 procedures must be used from the outset. For end of year reporting requirements you should follow the normal rules.
What do I do where a student who works in the holiday under P38(S) procedures leaves and returns during term time?
If the student has worked in the holidays under the P38(S) procedures and then, after a break, takes a new job with the same employer in term-time, he/she should complete form P46 with a tick against Statement B to reflect that he/she has worked previously in the tax year. Emergency tax code would apply on a week 1 basis.
At the end of the tax year, you should make one P14 report for both periods of employment.
At the end of a period of any employment entirely covered by the P38(S) procedures does the employer have to give the student a P45 (parts 1a-3)?
No, there is no requirement for you to provide a departing employee with a P45 parts 1a-3 when National Insurance only applies. But, as soon as the P46 procedures set out above apply, then you must give a P45 to the employee when they leave you. The P45 must include all the earnings in this employment, including those covered by the P38(S).
