My understanding is that even if student loan repayments would be due if a SA return was filed, if client has not received a notice to file and also has no additional income tax to pay, there is no requirement to request a SA return.
Anyone disagree?
Replies (36)
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Money Laundering?
Would the money laundering regulations mean you need to file a report on this client if he does not file a tax return, as he is benefitting from non-payment of student loan?
Surely knowing he ould have a student loan repayment liability, that in itself would give rise to a liability to file a tax return?
So, yes, I disagree.
What is the problem?
The liability to repay student loans depends on your type of income. If you are within PAYE it is based on earnings per month like NIC.
The only time this is not the case is if you have to file a Self assessment return for another reason as the return is only capable of an annual calculation not monthly.
As student loans is not one of the criteria for SA there is no extra liability hence nothing to report.
investment income over £10k
If there is income from savings or investments of more than £10,000 I thought it was necessary to complete return?
Student loan criteria
This is not about the criteria for submitting a return. This is about the criteria for student loan repayments. Your client has income above the limit for repayment, so a repayment is due. A return is just the means for a person not earning enough under PAYE for making those repayments. That does not seem to be what s7 TMA 1970 states - HMRC have set out their own criteria, which is where I think you get the £10k from, but I don't think it has any legal standing,
If your client makes arrangement to make the student loan repayments in some other way, then there is no money laundering matter. Are they planning to do so, or are you both relying on a return not being legally required to file a return as a means of avoiding disclosing the fact that a repayment is due?
Well it certainly is required to repay student loan on income including dividends over limits so how are they to be calculated and paid without a SA return?
Seriously?
You're really going to take that stance? That if there is no legal obligation to notify them, despite there being a clear legal obligation to actually make repayments, then you are just going to keep quiet and do nothing? Thanks Stepurhan, could you please point me to the reference for the obligation to notify someone (presumably the student loan company) that student loan repayments are due where no self assessment return is required.
I think you might want to review your ethics studies.
This
You're really going to take that stance? That if there is no legal obligation to notify them, despite there being a clear legal obligation to actually make repayments, then you are just going to keep quiet and do nothing? Thanks Stepurhan, could you please point me to the reference for the obligation to notify someone (presumably the student loan company) that student loan repayments are due where no self assessment return is required.I think you might want to review your ethics studies.
If people spent less time worrying about the strict letter of the law and more time using common sense/being a decent human being, the world will be a better place...and tax legislation wouldn't have to span a dozen books each a zillion pages long.
Don't be daft
Thanks Stepurhan, could you please point me to the reference for the obligation to notify someone (presumably the student loan company) that student loan repayments are due where no self assessment return is required.
The former student will have already been notified by the student loan company when the obligation to make repayments begins to arise and the circumstances under which it arises (i.e. when income exceeds the threshold). The obligation on the former student is to make the repayment in the relevant years, in accordance with the contract they have signed when they first accepted the loan.
HMRC are obliged to collect the payments if needed and to offer two methods for doing so (via SA and via PAYE). The borrower may also elect to repay the student loan company directly over 23 months should they so choose, and HMRC will not need to get involved. Either way, the obligation to pay is clearly in the hands of the borrower, and the collection methods provided are immaterial to the obligation.
This is all covered in the Education (Student Loans) (Repayment) Regulations 2009 as amended by the subsequent 2012 act, and the simple fact is that there is no way for your client to worm out of their obligation to pay.
I think if you look on the student loan webpages it is quite clear when repayments are due.
Clearly I've misunderstood you then.
Then perhaps you could explain why you asked this question then. The question is not about avoiding payment where it is due.
Because I can't help thinking making the payment due involves notifying the student loan company (by making a payment to them if nothing else). If there is every intention of making the payments due, why did you ask this question? Because, in all honesty, the only reason I can think of pressing the point is that there was no intention to pay if notification was avoidable. Please explain your perfectly innocent alternative. Thanks Stepurhan, could you please point me to the reference for the obligation to notify someone (presumably the student loan company) that student loan repayments are due where no self assessment return is required.
The other question?
What about your other question? The one about whether there is a legal obligation to notify the student loan company? The one which you have provided no innocent explanation for? The one that, as it stands, makes your assertion that there was no intent to avoid payment look like a lie. Yes, there is a lot of misuderstanding here - if you re-read the OP, it is quite clearly a technical question about whether a legal obligation under 'notify chargeability' for SA arises in the circumstances stated.
As I've said, if I'm misunderstanding that question, please feel free to enlighten us as to your innocent explanation of it. If you are unable to do so, then repeatedly claiming we are misunderstanding you is just insulting our intelligence.
I know I shall regret saying this, and
without wishing to rehash the whole ... "should a director register for SA?" question (PLEASE NO NOT AGAIN!!!), do the income figures in the OP not rather suggest that the student may have set up their own company, is a director and is optimising salary and dividends, so that HMRC might pick up that they are a director and by their criteria should be within SA so that returns will be required by HMRC at some point.
NONE of which is to say that on the facts set out in the OP the student is required to register for SA solely for the SL repayments.
Look for example at the slightly different example of two jobs on page 14 of the booklet at http://www.studentloanrepayment.co.uk/pls/portal/docs/PAGE/RPIPG001/RPIPS001/RPIPS006/SLC_REPAYMENT_BOOK_EN.PDF where it finishes with "If HMRC don't send you a tax return, you'll not have to make further repayments beyond those already taken by your employer". That example envisages the possibility of someone earning 2 x £18k from two jobs but only repaying 9% of the excess over £16,910 deducted by each employer.
I agree with @stepurhan. If
I agree with @stepurhan. If your client knows that he is liable to make student loan repayments and is anxious to comply with that obligation, surely the simplest way for him to do so is to complete a tax return and make the necessary payment that way. Whether he is legally required to do it that way, or whether he has other more complicated options available lo him, hardly matters does it?
I'm no expert on student loans but once upon time I had one myself. The loan helped me graduate ( funded new lap top ) , get a job , earn money. Loan repaid within 18 months because I was/ still am averse to debt
It really does boil down to debt mentality and ethics. The client ( director ?) can afford to make a token repayment at least , so advise him to pick up phone with debit card in hand and give a dog a bone.
Why complicate matters worrying abut SA registration ? He wants to clear this debt asap because he may have grown up TAXES to pay one day aswell !
Not sure what the loan agreement says re repayment requirements
but based on the examples in the SLC doc link I gave there appears to be no requirement to formally enrol in SA just for the SL repayment.
Except that it is salary & divs it is roughly equivalent to the example given there which suggests that if there's no requirement for the employer to deduct (because of salary levels) and no SA return has otherwise been required then there's no SLC repayment requirement - the example quotes two employments at £18k and no need to register for SA re SCL alone if everything else is correct re tax due and paid for the year.
Your posting at 16.33 could be interpreted as meaning that unless legal reference can be provided to your client he won't contact the SLC. So the interpretation of some has been understandable.
A student loan does not in itself oblige registration for SA. If you decide he meets one of the other criteria for SA then he completes the box on the return saying he has an income contingent loan and pays through his balancing payment.
If he does not meet any of the criteria for SA then as has been indicated above he needs to ring the SLC who will assess how much he has to pay and they will set up a direct debit. I believe the payments normally start from the following 6 April.
So for the next 25 years pay a small salary with dividends, never file a SA return, never contact SLC and then what - get the loan written off?
Well if it was me...
I would pay the student loan repayment because I dont like going to jail, not even to visit.
Think there is a threshold of 2000 pounds unearned income for additional SLR so a larger amount of unearned might mean HMRC was due monies with penalties and interest charges best to phone and ask help desk.
Unearned income & Student Loan repayments
Student Loan repayments via PAYE are based on Class 1 NIC earnings of which dividends is not.
However unearned income of more than £2,000 such as dividends requires additional student loan repayments.
HMRC assess this via the SA return.
My last was not clear.
If you have to repay on earnings and you have 1999 unearned no problem.
If instead you have 2001 you repay rather more.
I think HMRC should have sent a SA request & claiming it must have been lost in post student flat change of address etc. won't reduce interest.
Unless you are sure the two incomes are not additive you need to register and database details.
HMRC won't react if you don't need to.
Puzzled.
Having read the responses to the OP I was a bit nonplussed as to why it suddenly became a question of ethics. The first tax textbook I ever read started with a bit of advice. "There are two types of tax payer, those who pay because they are told to pay and those who pay because it is written down that they should (i.e. legislation), make sure you belong to the latter". It seems to me that the question was asked in that spirit, surely the responses should have recognised that. Ethics lies in the proper discharge of responsibilities. If a loan agreement is signed then that is where the ethics lie. Not in the judgement of whether avoidance is being utilised via the tax system. The OP seemed more about ascertaining where the reporting and payment mechanism properly lay.
Beyond the OP
The OP did indeed seem more about that. When they went on to ask if there was a requirement to notify the student loan company, that is when it became a question of ethics. The loan agreement makes clear when repayment is due. I can only think of one reason for asking whether there was a legal requirement to notify the student loan company those criteria had been met, to hide the fact (by non-notification) that repayment was due. Whilst claiming they were never seeking not to pay, the OP has failed to offer an alternative explanation for the question. Can you? The OP seemed more about ascertaining where the reporting and payment mechanism properly lay.
So whilst it might not have started as an ethics question, later responses definitely made it one.
Ultimately it looks like you need to see what the agreement
actually says.
In the circumstances you quote, and based on the SLC guidance you repay
through PAYE if you're employed; orthrough SA if you're self employed, or HMRC require you to make a return for any other reason)
Both subject to total income limits.
But if you have two jobs then the FAQ's say the repayment is merely what your employer deducts and you do not have ta ask to be put onto SA to pay the extra if the only reason for registering for SA is to pay the extra SL repayment.
If you follow the various SLC examples, and on the information provided in the OP (£10k salary & £20k divs) you would appear to come within the PAYE route, but salary is below the level that requires a repayment by deduction through PAYE.
You might just make a voluntary payment, but whether you are required to by the terms of the loan agreement is another matter.
Looking at other bits of the SLC FAQ's they might ask what the client is living on and for proof of savings from a bank statement etc. Whether that would then require a payment of the excess without being in SA - which again SLC say you do not have to apply for just to make SL repayments - is another matter. There is no obvious suggestion that SLC would ask HMRC to put one into SA based on the responses to the proof of savings.
The fact that the detail of the OP would suggest that the client might be a director of their own company and that the dividends are tax efficient 'disguised' income could mean that in HMRC's (incorrect) view is that they must register for SA as a director ... but we've been down that path far too often!
So again it all comes down to exactly what the terms for repayment are in the SL agreement. Presumably they must cover things like twin employments in the example the SLC FAQ's give. Perhaps they didn't consider remuneration options suggested in the OP, which are probably becoming more common. Who knows? Perhaps I need to take a look at #2 son's SL agreement when I see him next.
EDITED for typos, punctuation and clarity as to what I was driving at (hopefully)
Scholarship income?
I believe our high flier trainee teachers on £25,000 tax free scholarships do enjoy a year's holiday from student loan repayments? This assumes the scholarship/bursary awards are disregarded income.