ESM2635 - Trainee Educational Psychologists - tax and NICs consequences
Trainee educational psychologists are engaged under contracts of
training for all or part of their training depending on the
programme under which they were trained. Whilst engaged on a
training contract they receive maintenance grants. These are not
earnings for income tax or NICs purposes. If a training grant has
been subjected to PAYE or has Class 1 NICs accounted for in error
you should obtain all of the papers and arrange for repayments to
be processed. See BGN memo – “BGN007/07 PAYE: NICs:
Repayment of income tax and Class 1 NICs to trainee educational
psychologists.”
Training Programme for educational psychologists 1996
– 2006
Trainees under this Programme entered into a training
contract with the Local Government Employers (LGE) (previously the
Employers Organisation for Local Government). Trainees were usually
serving teachers or local government officers. They were required
to resign from their teaching jobs and appointed to
“host” local education authorities (LEAs) as trainees
for one academic year (1 September to 31 August following). During
the year trainees were required to complete a course of university
study leading to the award of a Masters Degree in Educational
Psychology.
The “host” local authority issued contracts of
employment to the trainees and paid what they believed to be
salary. HMRC reviewed the arrangements in 2005 and decided that the
trainees were engaged under contracts of training. Trainees who had
participated in this Programme and were subject to PAYE/ Class 1
NICs are entitled to refunds of income tax and NICs.
Training Programme for educational psychologists commencing
September 2006
The previous Programme required trainees to study for one
year and obtain a Masters degree in Educational Psychology. The
2006 Programme lasts for 3 years and requires candidates to obtain
a Ph.D.
In Year 1 the trainees are engaged under contracts of
training and hosted by local authorities in similar fashion to the
earlier Programme. They attend university full time and may
undertake placements in local authority educational psychology
units. They are paid training allowances that are not earnings for
tax and NICs purposes.
In Years 2 and 3 trainees are required to obtain employment
with local authorities as trainee educational psychologists. They
are required to attend university for part of the term-time weeks.
On other days they perform services for their employers. Payments
received from employing local authorities in Years 2 and 3 are
earnings and should be subjected to PAYE and have Class 1 NICs
deducted.
