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HMRC internal manual

Employment Income Manual

Trainee Educational Psychologists - treatment of educational maintenance payments made during period of university training

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. While engaged on a training contract they receive educational maintenance grants. These are not earnings for income tax or NICs purposes.

Statement of Practice SP4/86 is not relevant to these trainees as they are not employed by the host local authority (see below).

If a training grant is subjected to PAYE or has Class 1 NICs accounted for in error you should obtain all of the papers and process the repayments. See Business Guidance Note BGN005/07.

Training Programme for educational psychologists 1996 – 2006

Trainees under this Programme entered into a training contract with the Local Government Employers (LGE) (previously the Employer’s 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 1 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 have or are having repayments of income tax and NICs.

Training Programme for educational psychologists commencing September 2006

The previous Programme required trainees to study for 1 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 employer local authorities in Years 2 and 3 are earnings and should be subjected to PAYE and have Class 1 NICs deducted and accounted for.