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HMRC internal manual

Collection of Student Loans Manual

From
HM Revenue & Customs
Updated
, see all updates

Compliance: employer compliance: employer irregularities

This subject is presented as follows

Failure to deduct or insufficient deductions

If the employer has failed to make any Student Loan deductions or has made insufficient deductions you should

  • Advise the employer that by making incorrect deductions, they are potentially liable to penalties at the end of the year. See CSLM9035 for more information
  • Ask the employer whether there are any other employees for whom they have failed to deduct the correct amount of Student Loan repayments
  • Tell the employer that in future they should ensure that the right amount of Student Loan repayments are deducted and paid over to HMRC at the correct time
  • Offer the employer advice on future compliance and point them towards the help available. For example Employer’s Guide, Employer’s Helpline, Business Support Teams
  • Consider extending the review to previous years but remember that 2000-2001 is the first year for CSL. The Compliance Operational Guidance at COG906090 onwards provides further guidance on extending the review

A full report of your conversation, actions and advice given must be included in the case papers and you should confirm any instructions given to the employer in writing.

If you have to revisit the employer during the course of the review you should confirm that your instructions have been followed and any amendments made. Otherwise, you should ask the Assistant Compliance officer (ACO) to

  • Put the review on B/F for a date after the end of the tax year

And

  • Make appropriate checks to confirm the instructions have been carried out

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An employer who does under deduct Student Loan repayments may correct the mistake in subsequent pay periods for the same year of assessment subject to a capping limit. For more information see CSLM20000 onwards.

You should draw the employer’s attention to this and explain that it is covered in the Employer Helpbook E17, Collection of Student Loans - An employer’s guide to the collection of student loans.

Failure to make a return

An employer is required to make a return of Student Loan deductions on the P35.

Failure to make a return only applies if at the commencement of an Employer Compliance Review a P35 has not been submitted by the filing date.

If an employer has failed to make a return ECOs should

  • Ask the employer why no return was made
  • Advise the employer that by failing to make a return he may be liable to penalties
  • Offer the employer advice on future compliance and point them towards the help available. For example Employer’s Guide, Employer’s Helpline, Business Support Teams

Note: Where an employer has made Student Loan deductions but has not included them on a submitted P35, this is an incorrect return and not a failure to make a return

A full report of your conversation, actions and advice given must be included in the case papers and you should confirm any instructions given to the employer in writing.

Failure to pay Student Loan deductions to HMRC

If the employer has made Student Loan deductions but has failed to pay them to HMRC in an open year the ECO should

  • Ask the employer why the Student Loan deductions have not been paid to HMRC
  • Ask the employer if they have failed to pay over amounts for any other employees
  • Calculate the amount payable
  • Advise the employer that the amount payable should be paid to Banking Operations with the next remittance of PAYE / NICs / Student Loan deductions
  • Offer the employer advice on future compliance and point them towards the help available. For example Employer’s Guide, Employer’s Helpline, Business Support Teams
  • Include a full report of any conversation, actions and advice given in the case papers

And

  • Confirm any instructions given to the employer in writing

Normal recovery action will be taken in cases where deductions made have been correctly reported on a submitted form P35 but remain unpaid.

Where ECOs identify Student Loan repayments that have been deducted but omitted from the P35, they should take action to recover any underpayment. For example, if an employer has deducted £500 but only included £300 on the P35 / P14s, ECOs should recover the £200 that remains unpaid.

Incorrect returns

An employer who makes Student Loan deductions is only required to return the actual Student Loan deductions that have been made. This may not be what was due.

If the employer has made an incorrect return of Student Loan deductions you should

  • Advise the employer that by making an incorrect return, they are potentially liable to penalties. For more information see CSLM9035
  • Where the P14 figure is not the same as the P11 deduction total, ask the employer whether there are any other employees for whom they have entered an incorrect figure on the P14 and extend the check to all P11s which include Student Loan deductions
  • Tell the employer that the amounts deducted must be entered on P14s and / or the P35 in future and paid over to HMRC at the correct time
  • Recover the deductions made that have been underpaid
  • Consider extending the review to earlier years and seek penalties. Note: 2000-2001 is the first year for CSL. The Compliance Operational Guidance at COG906090 onwards provides further guidance on extending your review
  • Offer the employer advice on future compliance and point them towards the help available. For example Employer’s Guide, Employer’s Helpline, Business Support Teams
  • A full report of your conversation, actions and advice given must be included in the case papers
  • Confirm any instructions given to the employer in writing

And

  • Include any underpayment identified in a negotiated settlement where possible

Note: Only the Student Loan repayments actually deducted by an employer that remain unpaid can be recovered

Where an employer will not make an offer in settlement, you need to go down the formal route.

Regulation 62 of the Student Loan Repayment Regulations provides for the recovery of any Student Loan deductions that have been made but either have not been paid to HMRC or omitted from the employer’s End of Year return.

An Inspector should raise a Regulation 45 determination for the total deductions that remain unpaid. For more information, see CSLM9040.

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