PAYE46025 - Employer returns: employer return post capture: collection of student and postgraduate loans (CSL)

This subject is presented as follows:

Background
Student Loans Company (SLC)
Definition of earnings
Student Loan (SLD) and Postgraduate Loan (PGL) deductions
Payment to HMRC
Starting SLDs and PGLs
Stopping SLDs and PGLs
East Kilbride Student Loan Unit (EKSLU)
Reporting SLDs and PGLs on returns
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% 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 to 1999 academic year.

From April 2019 HMRC took on the responsibility for the collection of Postgraduate Loan repayments for borrowers from England and Wales.

Repayments on a student and or postgraduate 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 on GOV.UK New employee and student loans.

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 and postgraduate loan deduction purposes will be identical to the measure of earnings computed for the purpose of deducting Class 1 National Insurance Contributions.

Student Loan and postgraduate loan repayments are not a deduction for tax or NIC purposes.

Student Loan (SLD) and Postgraduate Loan (PGL) deductions

Student Loan deductions are made on a non-cumulative basis and are based on a percentage rate of 9% of the borrower's earnings in excess of the annual threshold.

An employer will use monthly or weekly thresholds based on an apportionment of the annual threshold.

Postgraduate loans are also made on a non-cumulative basis and are based on a percentage rate of 6% of the borrower's earnings in excess of the annual threshold. A postgraduate loan can be repaid at the same time as a Plan 1 or Plan 2  or Plan 4 loan.

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 or PGLs made against all the previous pay periods.

Payment to HMRC

The employer should:

  • keep separate details of the SLDs and PGLs
  • pay over SLDs and PGLs together with PAYE and NICs collected during the same period.

The amount of SLD and PGLs payable to Banking Operations will be included in the tax figure on the payslip.

Starting SLDs and PGLs

An employer should only commence SLDs and PGLs 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’
  • the employee tells them that they are in the process of repaying a student loan and/or PGL, for example when they complete the starter checklist
  • they have received a Generic Notification Service (GNS) message from HMRC prompting them to start taking deductions.

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 or PGL1 
  • contact the East Kilbride Student Loans Unit (details below), tell them that the employer has received an incorrect SL1 or PGL1 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 and PGLs

An employer will normally be told to stop making SLDs and PGLs 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 or PGLs to the final pay day and then enter a ‘Y’ in the appropriate box on the form P45. The P45 will not show what loan or plan type so if your employee has PGL and or SL you should enter a ‘Y’ in the Student Loan box.

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 or PGLs 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 Collection of Student Loans 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 content has been withheld because of exemptions in the Freedom of Information Act 2000)

Reporting SLDs and PGLs on returns

Employers are required by law to report Student Loan and Postgraduate Loan deductions.

They must follow all the normal Real Time Information (RTI) payroll obligations and send the student loan and postgraduate loan deduction details on their monthly Full Payment Submission (FPS).

The Student Loan Service or (SLS) is the computer IT support for the collection of Student Loans.

Liaison with East Kilbride Student Loan Unit - Incorrect NINO on P14

Where EKSLU identify a P14 with an incorrect NINO they will take action to identify and confirm:

  • The correct NINO
    or
  • The correct date of birth and gender.