PAYE46025 - Employer returns: employer return post capture: collection of student loans (CSL)
This subject is presented as follows
Background
Student Loans Company (SLC)
Definition of earnings
Student Loan deductions (SLD)
Payment to HMRC
Starting SLDs
Stopping SLDs
East Kilbride Student Loan Unit (EKSLU)
Reporting SLDs on returns
Liaison with East Kilbride Student Loan Unit and Amended P14s
Liaison with East Kilbride Student Loan Unit - Incorrect NINO on P14
Background
From April 2000, HMRC took on responsibility for the collection of Student Loan repayments. For employees (it is anticipated that around 90 per cent of borrowers will be employees) this will mean that their employers will be making Student Loan deductions (SLDs) through the payroll.
This applies to students who commenced a course in higher education during or after the 1998-99 academic year.
Repayments on a student loan will not start until the 6 April following the date on which a borrower completes (or otherwise leaves) a course and will be dependent on their level of income.
Employers can find more details in booklet E17 ‘Employer’s Guide for Collection of Student Loans’ available from the employers section of the hmrc internet at www.hmrc.gov.uk.
Student Loans Company (SLC)
The SLC is funded by the Educational Departments in England, Scotland and Northern Ireland.
The SLC will
- Provide HMRC with details of borrowers who have completed their course. This will enable a match to be made with HMRC computers to issue Start Notices to employers, advising them to make deductions
- Keep a record of loan balances
- Inform HMRC when a Stop Notice should be issued to an employer where a loan is due to be repaid in full
- Take over responsibility to collect any remaining balance or repay any amounts over-deducted
- Collect payments from borrowers outside the UK
Definition of earnings
Earnings for the student loan deduction purposes will be identical to the measure of earnings computed for the purpose of deducting Class 1 National Insurance Contributions.
Student Loan repayments are not a deduction for tax or NIC purposes.
Student Loan deductions (SLD)
Student Loan deductions are made on a non-cumulative basis and are based on a percentage rate (Word 24KB) of the borrowers earnings in excess of the annual threshold (Word 25KB).
An employer will use monthly or weekly thresholds based on an apportionment of the annual threshold. A Student Loans Deductions Table is provided to assist an employer in the calculation of SLDs.
As deductions are non-cumulative an employer will not be expected to pay deductions back to an employee where their earnings previously over the threshold go below the threshold for a period. Similarly, an employee’s earnings which due to a bonus payment for example, take them over the threshold would not be expected to have SLDs made against all the previous pay periods.
Payment to HMRC
The employer should
- Keep separate details of the SLDs
- Pay over SLDs together with PAYE and NICs collected during the same period
The amount of SLD payable to Banking Operations will be included in the tax figure on the payslip.
Starting SLDs
An employer should only commence SLDs where
- A Start Notice has been received from HMRC
- The employee hands the employer a P45 with a ‘Y’ in the box marked ‘Student Loan’
Or
- The employee hands the employer a P46 with a tick in Box D, marked ‘Student Loan’
A Start Notice will be issued at least 6 weeks before the date on which the employer is required to take on responsibility for making SLDs.
If the employer or taxpayer complains that the Start Notice is clearly inappropriate then you should
- Advise the employer to make no further deductions whilst enquiries are made. The employer can file the SL1
- Contact the East Kilbride Student Loans Unit (details below), inform them that the employer has received an incorrect SL1 notice and ask them to investigate
A P45 should be actioned by the employer as soon as reasonably possible.
There are no other circumstances under which an employer is required to make deductions.
Stopping SLDs
An employer will normally be advised to stop making SLDs by means of a Stop Notice issued by HMRC.
There may be other occasions where an employer will be required to cease making deductions before a Stop Notice is received these are
- Where the employee leaves
Or
- The employee dies
In both of these situations the employer should deduct SLDs to the final pay day and then enter a ‘Y’ in the appropriate box on the form P45.
There are no other circumstances under which an employer should cease making deductions without specific authority from HMRC.
If an employee advises an employer that their loan has been repaid in full the employer will not be able to confirm this. The details about the loan are retained by the SLC. The employer must continue to deduct SLDs until the Stop Notice is received. If there are any disputes the employee will need to take this up with the SLC.
If an employee leaves but receives a further payment after a P45 has been issued the employer must deduct loan repayments from the further payment unless a Stop Notice has been issued by HMRC to that employer.
East Kilbride Student Loan Unit (EKSLU)
A CSL Unit ‘East Kilbride Student Loans’ has been set up in Centre 1 to
- Handle enquiries from the Student Loans Company (SLC) where a student disputes the deductions made from their earnings
And
- Process any repayments of incorrect deductions to the student
If you receive any queries on Student Loan discrepancies that you are unable to answer you should in the first instance refer these to your office’s ‘Student Loan expert’ to deal with. If they are not available you will be able to contact the unit and arrange for them to handle these discrepancies.
(This text has been withheld because of exemptions in the Freedom of Information Act 2000)
Reporting SLDs on returns
Employers are required by law to report Student Loan deductions.
They must
- Enter the SLDs on forms P14
And
- Enter total amount of SLDs for all employees on form P35
The Student Loan Service or (SLS) is the computer IT support for the collection of Student Loans. This computer will pass details automatically to both BROCS and the Employer Business Service (EBS) of any Student Loan employers by setting an indicator on both computers.
(This text has been withheld because of exemptions in the Freedom of Information Act 2000)
Liaison with East Kilbride Student Loan Unit and Amended P14s
From October 2004 the East Kilbride Student Loan Unit (EKSLU) will no longer be able to manually correct Student Loan deduction figures submitted on forms P14. Any amendments agreed with the employer will require the employer to submit additional P35 and P14 to correct the end of year entry relating to Student Loan deductions.
EKSLU will contact the employer and request that they send an additional return to their responsible office. They will then forward a stencil to advise you of their actions. The Action Guide ‘Collection of student loans (CSL)’ PAYE46026 explains the actions you must take to deal with these stencils.
Liaison with East Kilbride Student Loan Unit - Incorrect NINO on P14
Where EKSLU identify a P14 with an incorrect NINO they will contact the employer to confirm
- The correct NINO
Or
- The correct date of birth and gender
EKSLU will prepare Stencil C (Word 36KB) and forward this with a copy of all the P14s, printed from the e-Services filestore, with incorrect NINOs. The Action Guide ‘Collection of student loans (CSL)’ PAYE46026 explains the actions you must take to deal with these stencils.
