CSLM17015 – SL repayments: borrower within PAYE: when employer should stop deducting

The employer should continue making Student Loan deductions until either

• A Stop Notice is received from HMRC

Or, exceptionally

• Specific authority is received from HMRC to stop making deductions

The employer must not stop making Student Loan deductions for any other reason, for example, if the employee states that the loan has been paid off.

Stop Notice (Form SL2)

A Stop Notice is automatically issued by HMRC when

• Instruction are received from the Student Loans Company, normally when it is calculated that the loan is about to be fully repaid

Or

• A form P45(3) is processed which contains a 'Y' in the box headed 'Continue Student Loan Deductions' but the taxpayer is not a borrower and deductions may, therefore, be made in error

In deciding when to authorise the issue of a Stop Notice the Student Loans Company will take into account the pattern of repayments made during earlier years and the balance remaining on the borrower’s account. Inevitably, however, information held by the Student Loans Company will not be up to date and their prediction could be affected by factors such as

• Unexpectedly large pay rises
• Change of employment

Or

• Periods of unemployment

The prediction should not therefore be seen as a precise science and in the majority of cases the borrower will be left with an underpayment or an overpayment. This is dealt with in more detail in CSLM20000 onwards.

When the employer receives a Stop Notice, directions as to when to stop making Student Loan deductions are clearly stated as follows

'Notice to employer to stop Student Loan deductions.

Deductions must stop on the first available pay day after the Student Loan deduction stop date shown below’.

Unless there are exceptional circumstances the employer should observe the instructions on the Stop Notice. If the borrower wishes to query the deductions being made he or she should take this up with the Student Loans Company.

Employer completing form P45 – The 'old' employer

The form P45 includes a box headed 'Continue Student Loan Deductions' to indicate that the taxpayer is a borrower for whom Student Loan deductions have been authorised.

When a borrower ceases employment the employer should enter a 'Y' in the box headed 'Continue Student Loan Deductions' if the employer has previously received

• A Start Notice from HMRC
• A form P46 with a tick in box D (Student Loans)

Or

• A form P45 with a 'Y' in the box headed 'Continue Student Loan Deductions'

And

• No Stop notice has been received from HMRC

In these circumstances a 'Y' should be entered in the box headed 'Continue Student Loan Deductions' on form P45 even if the employer has not actually made any deductions, for example, if the borrower’s wages were too low for deductions to be made.

Notification by HMRC

There may be circumstances in which a Start Notice has been issued to the employer in error. For example, if the borrower has provided the Student Loans Company with an incorrect NINO which relates to a taxpayer possessing the same surname or date of birth. The result could be that the Student Loans Company record has been matched against the wrong PAYE record.

If the employer complains that the Start Notice is clearly inappropriate then you should

• Advise the employer to make no further deductions whilst enquiries are made
• Confirm the position to the employer in writing, retaining a copy

If the error arises from a 'Y' being entered in error in the P45(3) box headed 'Continue Student Loan Deductions’

• Ensure that the P45(3) has been correctly processed - a Stop Notice will be issued automatically

In all other cases

• Write or telephone the Student Loans Company giving the facts and asking them to

Note: Send your memo to

ICR Team
Customer Services
Student Loans Company Ltd
100, Bothwell Street
Glasgow G2 7JD

And

• Ask the employer to repay deductions (if appropriate). For more information see CSLM20000 onwards

A Stop Notice will be automatically issued if authorised by the Student Loans Company.

This action should only be taken if there has clearly been a serious error.

In cases where the borrower or employer is querying whether repayments should be made because of the balance on the borrower’s account, the borrower should contact the Student Loans Company in the normal way. Deductions will continue until either

• A Stop Notice is issued

Or

• You are advised by the Student Loans Company to instruct the employer to stop making deductions. This will be a very rare occurrence