Student Loan Deductions – Replacement Regulations effective from April 2009Monday, March 23rd, 2009
From the start of the 2009/10 tax year, the statutory Regulations that govern the operation of the repayment of student loans have been extensively rewritten, consolidating changes that have been made since 2000, when the previous Regulations were made, and incorporating changes that reflect tax legislation included in the 2007 and 2008 Finance Acts. At the same time, the language and style of the Regulations have been updated for consistency with the ongoing work to modernise all of the tax legislation.
The new Education (Student Loans) (Repayment) Regulations 2009, as with the Regulations that they replace, cover all aspects of the recovery of income-contingent student loans, including repayment of loans under self-assessment and repayment by borrowers living abroad. With regard to the provision for deducting student loan repayments through the payroll, the new Regulations make no practical changes to the administrative rules and the procedures set out in HMRC’s E17 Helpbook apply fully during 2009/10.
However, the new Regulations now extend HMRC’s new compliance and penalty regime for PAYE and NICs, which applies to returns in respect of the 2008/09 tax year, to student loan repayments, starting with returns due for the 2009/10 tax year. For tax years
- ending on or before 5 April 2009, where an employer “fraudulently or negligently” submits incorrect student loan deduction figures on P14 and P35 returns, the employer will be liable to a penalty not exceeding £3000 for each employee for whom incorrect figures are reported;
- commencing on or after 6 April 2009, for P14 and P35 returns that are due to be filed on or after 6 April 2010, the new “30%/70%/100%” penalty regime set out in the Finance Act 2007 (that is introduced for PAYE and NICs from April 2009) will also apply where an employer “carelessly or deliberately” returns incorrect student loan figures.
Employers will also be subject to the new HMRC powers in the Finance Act 2008, providing HMRC with greater access to employers’ records of student loan deductions.
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