Student Loan repayments when working abroad

Frequently Asked Questions (FAQs)

Contents

• Do I continue making Student Loan deductions when employees begin to work abroad or do I stop at this point?
• Does it matter how long the employee will be working abroad?
• What happens when the employee begins to contribute to another social security system?
• I have heard of direct repayment of Student Loans by the borrower to HMRC/Student Loans Company, please can you tell me more?
• Does it make any difference if we continue to pay the employee and operate an NT coding?
• What happens if I am operating the modified NIC procedure for expatriates (see EPM, new App 7B) whereby I use a best estimate to account for the NIC due in relation to my expatriates and account for any balance by 31 March after the end of the tax year?
• Do I need to notify HMRC that the employee is working abroad?
• If the Student Loan stops when the employee works abroad, do I need to notify HMRC?
• Does it make any difference whether we continue to pay the employee from the UK or whether the employee is paid locally from abroad?
• How do I find out more about the position on student loans where employees work abroad?
• What if the employee leaves my employment while they are abroad and starts with an overseas employer?

Q. Do I continue making Student Loan deductions when employees begin to work abroad or do I stop at this point?

A. If you are continuing to pay the employee from the UK and you are operating PAYE as though the employee were in the UK, you should continue to make Student Loan deductions. You will receive a Stop Notice (SL2) if deductions should stop.

Q. Does it matter how long the employee will be working abroad?

A. No. If the employee is sent abroad by the employer, and continues to be paid through the UK payroll, the employer must continue to operate PAYE, deduct National Insurance Contributions and make Student Loan deductions. There are separate rules for employees who are likely to be out of the country for some time. In these cases, HM Revenue & Customs (HMRC) may tell the employer to operate code NT (No Tax should be deducted). Student Loan deductions should still be made because the employee is on the UK payroll.

Q. What happens when the employee begins to contribute to another social security system?

A. If you are continuing to pay the employee from the UK and you are operating PAYE as though the employee were in the UK, you should continue to make Student Loan deductions. You will receive a Stop Notice (SL2) if deductions should stop.

Q. I have heard of direct repayment of Student Loans by the borrower to HMRC/Student Loans Company, please can you tell me more?

A. If a borrower secures employment abroad and is paid abroad, Student Loans Company will ask for the name of the employer and evidence of the salary. Student Loans Company will calculate a repayment schedule based on 9% of the earnings over £15,000. The borrower will make repayments based on this calculation direct to the Student Loans Company using Direct Debit, Standing Order, cheque or debit card. The schedule will be reviewed after 12 months.
Each country’s threshold is determined according to its national average income. Where it is not possible to calculate a country's position of index, the applicable threshold and fixed instalment shall be those for band A. If a borrower fails to provide evidence of his income out with the UK, he will be required to repay a fixed monthly amount.
The Student Loans Company will work out the repayment amounts based on an average price index and an overseas threshold table which can be viewed here (PDF 16K).
If your employee asks for further information you should direct them either to the Student Loans Company on 0414 243 3660 or to the Directgov website.

Q. Does it make any difference if we continue to pay the employee and operate an NT coding?

A. If you are operating PAYE in the normal way except that you are applying code NT (No Tax to be deducted) instead of a numerical code, you should continue to make Student Loan deductions. A Stop Notice will be issued if you should stop making deductions.

Q. What happens if I am operating the modified NIC procedure for expatriates (see EPM, new App 7B) whereby I use a best estimate to account for the NIC due in relation to my expatriates and account for any balance by 31 March after the end of the tax year?

A. You will be using this procedure because your employees are liable to UK NICs but not to UK tax. The employee will be working abroad for a period of limited duration but for more than one tax year. The employee will not be liable to UK tax on their earnings from employment. Because you will not be operating PAYE as you would do were the employee working in the UK, you will not be making Student Loan deductions. The employee should contact Student Loans Company who will calculate how much he/she should pay. The repayments will be made directly to Student Loans Company.

Q. Do I need to notify HMRC that the employee is working abroad?

A. For the purpose of Student Loan deductions, you do not have to tell HMRC that the employee is working abroad. If you continue to operate PAYE as you would do were the employee still working in the UK, you will continue to make Student Loan deductions. If the employee, who is working for your company but is based abroad, leaves your employment you will issue a P45 with a 'Y' in box 5.

Q. If the Student Loan stops when the employee works abroad, do I need to notify HMRC?

A. No. The loan should stop only if you receive a Stop Notice (SL2). If the employee contacts you to say that the loan has been repaid, you should advise them to contact Student Loans Company. A Stop Notice will be issued if appropriate.

Q. Does it make any difference whether we continue to pay the employee from the UK or whether the employee is paid locally from abroad?

A. If you are continuing to pay the employee through your UK payroll, you will continue to make Student Loan deductions. If the employee is being paid from abroad and is no longer on your UK payroll, the employee should contact SLC to have a repayment schedule set up.

Q. How do I find out more about the position on student loans where employees work abroad?

A. HMRC publication CWG2 (PDF 462K) (Chapter 4) gives more information (on the Employer CD-ROM or from the Employer Orderline. For the individual, there is information on the Student Loans Company Limited website.

Q. What if the employee leaves my employment while they are abroad and starts with an overseas employer?

A. You should issue a P45 with a 'Y' in box 5 (Student Loans). The overseas employer will not make Student Loan deductions. The employee will be expected to contact Student Loans Company to set up a repayment schedule. If the employee starts with a UK employer again, the P45 will make sure that Student Loan deductions are made. If the P45 is not available, the new P46 will have the same result.