Owner Kate Upcraft Consultancy Ltd
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New ‘employer prompt’ for student loans – why?

21st Apr 2016
Owner Kate Upcraft Consultancy Ltd
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A surprise to many in last week’s Employer Bulletin was the announcement of a new generic notification notice (GNN) in respect of student loans, writes Kate Upcraft.

This hadn’t been raised previously with agents, employer rep bodies or software developers, other than those that attend the HMRC student loan consultation group.

The new GNN is going to be issued to the employer where an SL1 start notice has been sent but the FPS (full payment submission) shows no student loan deductions. The prompt will then be repeated if deductions don’t start, followed by a phone call to the employer. This raises a number of questions:

  • Presumably before initiating the GNN ‘prompt’ HMRC will check the NI’able pay is either in excess of the Plan 1 threshold of £17,495 for a Plan 1 repayer, or £21,000 for a Plan 2 repayer?
  • How will HMRC know that a council tax order is not in force for the employee as this blocks the payment of a student loan?
  • If the employer has failed to action a student loan start notice it may be that it never arrived, so rather than keep issuing a ‘prompt’ why don’t HMRC simply reissue the start notice?

Feedback so far seems to indicate that the phone call is intended to assist employers who do not know how to download start notices. This is somewhat difficult to believe. If an employer does not know how to download start notices that have been issued electronically for a number of years, presumably they also do not know how to download tax code notices which are done the same way? Do HMRC really have evidence that at this stage there are many employers, let alone agents, who do not know how to collect and implement basic PAYE information?

Staying with the theme of student loans, the subject of refunds has become somewhat confusing over recent weeks. We had been told in the run-up to the start of the new tax year that any refunds of over-deductions required because the employer or agent had, as requested by HMRC in the August Employer Bulletin, implemented a Plan 1 threshold of £17,495 which latterly turned out to be incorrect as the student should have had a Plan 2 threshold of £21,000 would be handled by the student loan company (SLC), not the agent or employer.

It appears this is now a trial, with results to be evaluated in due course. It is to be hoped that the student loan company will continue to offer refunds as the employer/agent has not made an ‘error’ and equally some payroll software is unable to facilitate refunds of student loan deductions. It is certainly not possible to make a refund that crosses tax years as this will lead to the student loan deductions YTD showing as the negative which will cause the FPS to fail validation by HMRC.

Finally, there is the small matter of the ex-students who have both a Plan 1 and a Plan 2 loan. Payroll software developers have been asked only to allow a Plan 1 or Plan 2 to be in place, as only one loan would be in repayment at any one time.

I have though today come across an individual who has received both a Plan 1 and a Plan 2 start notice for April. The payroll software has defaulted to Plan 1. We shall have to see if this is correct. Remember that from this month on receipt of an FPS that shows a student loan repayment, HMRC will always issue an SL1, which will serve either to confirm that the plan in place is correct or that it should be switched from Plan 1 to Plan 2 or Plan 2 to Plan 1.

Ensure that you have amended your payroll processes to check that all student loan start notices correlate to the plan type that is in place on the employee’s record. If the employee questions why there is only one repayment when they have two loans, you can point them to this guidance from the student loan company which explains at what point loan repayments are apportioned between each plan when they are received annually from HMRC.

Replies (6)

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By Old Greying Accountant
22nd Apr 2016 11:14

What would be more useful ...

... is if the P45 showed loan repayments to date!

Thanks (2)
By akis_t
22nd Apr 2016 13:36

How is the government planning to recover loans made to foreign students ? Agreements with the respective foreign governments? Please. I am personally aware of three foreign students whose dads have told me they will never repay anything, Why did the government then make these loans available to foreign students who will most likely leave the country and over who the British government has no powers?

Thanks (0)
rebecca cave
By Rebecca Cave
22nd Apr 2016 14:53

Gov.uk is wrong again

The thresholds for student loan repayments quoted on gov.uk are incorrect. They should be:

Plan1: £17,495 pa , £1457.91 per month, £336.44 per week

Plan 2: £21,000 pa, £1750.00 per month, £403.84 per week.

Note the pence which are not stated on the gov.uk tables, which incorrectly rounds up or down the figures for months and weeks.

I am grateful to Ian Holloway of Cintra HR & payroll services for pointing that out.

Thanks (0)
Replying to Slim:
By mcbride_r
25th Apr 2016 11:37

Gov.uk is wrong again

I pointed this out to them last year and nothing was done about it.

What I got in response was an email with a link to the student loan specification which correctly shows the calculation should include pence and not be rounded to the nearest pound.

I replied that we would always use the specification and again pointed out that the tables were misleading.


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Old fat furry cat-puss
By bagpuss1968
09th May 2016 12:22

After recruiting a bunch of graduates in April, we have now received six SL1 start notices through the HMRC online employer account.

Nothing unusal in that apart from the fact that only one of them has the Plan type stated (01), whilst five are blank. Can anyone help me out?

Many thanks

Thanks (0)
By AndrewV12
16th Nov 2016 15:51

Plan A, Plan B, well it always worth having a plan B, but not in this case, who keeps coming up with this daft proposed legalisation Louis Walsh?.

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