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.