Student and Form P38S – HMRC press release gives tax guidance for studentsWednesday, September 9th, 2009
A press release issued by HMRC on 2 September provides guidance to students on the procedures that allow them to be paid without having tax deducted if they earn less than the personal tax allowance during the 2009/10 tax year.
One aspect of the guidance conflicts, however, with the published employer procedures. In the context of a student keeping proper records, the press release states:
“A P45 is given out at the end of a job and shows the pay received and tax deducted between the start of the tax year (6 April) and the date the employment ceased (if before 5 April the following year).”
However, page 69 of the current CWG2 booklet states:
“Note that you should not fill in a form P45 when an employee leaves, for a student who, because of the P38(S) procedure, has not had tax deducted.”
The two statements do not fully contradict each other because, if tax has been deducted for a student who initially completes a P38(S) but whose earnings subsequently exceed the personal allowance, a P45 is completed on termination. However, if a P45 were issued as a result of applying the P38(S) procedures and no tax had been deducted., it would clearly be inappropriate for a new employer to receive a P45 showing a tax code of NT in those circumstances.
HMRC has been asked for clarification.
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