Blogger
Share this content
0
8
3037

Student Loan Anomalies

Following the revelation that the test for taking SL repayments is based on someone's NI position and not their tax position, a great many entertainers, doctors etc may well be inconvenienced and have to fork over their loan repayments.  If someone is self-employed for tax purposes then after expenses they may well be paying too much back to SLC.  Less of a problem than overpaying tax/NI but irritating nonetheless.  One can get back the excess payment but it takes ages and is very bureaucratic.

So we looked back and found someone who has paid both £600 in deductions off their wage packets and then a further £400 based on their profits.  We should have allowed for £600 already paid and avoided paying that £400.  Now I could amend the 10/11 Return to do this and as a result he would receive a tax rebate of £600.  But will HMRC appreciate that as a result of this, they should 'recall' the £600 they've paid to SLC on our boy's behalf.  And more pertinently from an MLR point of view, whose responsibility is it to do this? 

Replies

Please login or register to join the discussion.

avatar
17th Aug 2012 16:25

So if you have a minimum salary and maximum dividends you avoid SL repayments

Thanks (0)
avatar
17th Aug 2012 16:43

No

Because once you hit the threshold of £15k or so the repayments click in via self assessment. could be an issue tho for anyone with SL repayments who doesn't complete a self assessment but in in a position where they can manipulate their income sufficiently to take small salary and dividend. 

 

the only thing I can see that doesn't count towards the threshold is BiK. Trust income is in, divis are in, P60 is in. i even have a client who has moved abroad and the SLC info says he has to notify them and make repayments.

Marion what do you mean thie NI position btw?

Thanks (0)
avatar
17th Aug 2012 17:01

HMRC Guidance notes

refer to income for National Insurance purposes.

http://www.hmrc.gov.uk/paye/payroll/day-to-day/student-loan.htm 

In practice, I guess it is only really an issue for those professions who are subject to NIC as an employee but taxed as though they are self employed.  Doctors, actors and some lecturers spring to mind.

Thanks (0)
17th Aug 2012 17:27

I don't understand the question

"So we looked back and found someone who has paid both £600 in deductions off their wage packets and then a further £400 based on their profits.  We should have allowed for £600 already paid and avoided paying that £400.  Now I could amend the 10/11 Return to do this and as a result he would receive a tax rebate of £600."

If anyone has made student loan repayments under PAYE, it should be entered on their tax return.  As they will only have made such repayments if their gross income exceeds the £15,000 threshold, all of their self-employed profits will be subject to SL repayments.  Deductions of £600 and £400 respectively are entirely plausible.  If it was the other way round, it is possible that £400 was deducted from their salary and £600 was the total on their combined earnings shown on the tax return, so that only a further £200 should have been deducted from their self-employed profits, but this is not the case in your example.

Quite apart from that, if you amend the figure for SL repayments under PAYE, you will not get a tax refund.  You might get a change to any SL repayments due on the balance of his total income and you can leave it to HMRC to sort that out with the student loan people.

And I have no idea what your MLR fear might be.

Thanks (0)
avatar
17th Aug 2012 17:53

The way I read it

The adviser has not picked up a £600 Student Loan Repayment from payslips, which would have covered the £400 that was due on the Self Assessment Return.  Can we now go back and amend the figure on the 2011 Return so that the Self Assessment is reduced by £400?

As the deductions through PAYE are based on the NI position, not the PAYE taxable income position, it is possible to have someone earning £21,666 for National Insurance purposes which results in £600 being deducted for Student Loan through PAYE, but after applying the Self employment rules, for whatever reason, the Student Loan repayment due under Self Assessment coming down to £400.

HMRC manuals only make reference to refunding loan repayments over deducted under PAYE in error, and there is no mention of an error under SA.  However, the precedent for repaying amounts paid in error is set.  In the interests of equal treatment for tax payers you would expect that a repayment should be forthcoming, and it is then between HMRC and the Student Loan Company to sort out the borrower's record.

We have in the past been successful in recovering amounts overpaid because the loan has already been fully repaid, without any problems by simply amending the SA Return.  However, I have no experience of recovering overpayments made against current loans.

Thanks (0)
17th Aug 2012 20:59

Confusion

"So we looked back and found someone who has paid both £600 in deductions off their wage packets and then a further £400 based on their profits.  We should have allowed for £600 already paid and avoided paying that £400."

The above doesn't make sense. Somebody would appear to have employment and self employment. The first sentence makes that clear. I don't see why the deduction for employment income should mean that deductions don't need to be made for self employment income.

Of course if the first sentece is wrong then anything is possible!

Thanks (0)
avatar
21st Aug 2012 10:27

Not necessarily

petersaxton wrote:

"So we looked back and found someone who has paid both £600 in deductions off their wage packets and then a further £400 based on their profits.  We should have allowed for £600 already paid and avoided paying that £400."

The above doesn't make sense. Somebody would appear to have employment and self employment. The first sentence makes that clear. I don't see why the deduction for employment income should mean that deductions don't need to be made for self employment income.

Of course if the first sentece is wrong then anything is possible!

I think in this instance the client has a profession (acting for example) where National Insurance is payable as though they are employed but tax is paid on self employed basis.  Therefore, if you are not vigilant in checking payslips you can overlook Student loan deductions made through the PAYE system.  As total income exceeds the National Insurance threshold they will be liable to student loan deductions through Self Assessment.  If you have missed the deductions under PAYE the client will be paying student loan repayments twice. 

 

The other scenario where the Self assessment student loan repayment will be less than that payable under PAYE is when there are losses etc to offset against earnings.

Thanks (0)
avatar
31st Jan 2013 00:48

Student Loan Anomalies

How did you get this overpayment back from SL?

I have one such client (an actor) who is self-employed. However, for NIC purposes he is categorised as an employed earner and liable for Class 1 national insurance, despite being self-employed for tax. In effect it is common for performers to have a ‘dual status’ whereby they are self-employed for tax but employed earners for NIC purposes. 

In addition, most actors' contracts are contracts of service for national insurance purposes despite the fact that you are self-employed for tax. This is because tax status is determined by looking at the way you carry on your profession over a longer period, whereas for national insurance purposes your status is determined by looking at the terms and conditions of the individual contract. Equity contracts and their incorporated collective agreements contain complex provisions on rates of pay, overtime, holiday entitlement, sickness, working time, dismissal procedures, etc. These are terms commonly found in contracts of service and so earnings from these contracts should be subject to Class 1 NICs. 

This enables actors to claim jobseekers and benefits such as the state pension if they have paid enough NICs.

In my clients case, he is paying Class 1 NICS and his weekly wage is above the threshold for SL repayments and so they have been deducted (£1050 this year and £1400 last year). However, this does not take into account that he declares his earnings on his self-employed tax return and his profits would not be enough to be liable for student loan repayments.

I know you're all thinking it's a swizz , but let me explain:

my clients wage per week includes tour allowance as regulated by Equity at a rate of £190 per week. This money is to pay for digs or hotels and travel to and from the theatre and subsistence whilst away from home. Sometimes his wages include reimbursements for travel such as flights to different cities. He also has to pay his agent and VAT who take off 12.5% of any earnings and 20%VAT on this. Therefore, SL are making deductions on an amount before any of this has been deducted and is not his actual profit.

I have tried speaking with HMRC, DWP and SL but no-one as yet seems to have grasped the duality status. Who do I go to next to get this money repaid as he hasn't earned over £15000 yet in any tax year?

Thanks (0)