Public authorities have started receiving student loan notifications and messages from HMRC’s Generic Notification Service (GNS) about a failure to deduct repayments from workers caught under the revised IR35 rules.
On 6 April 2017, new rules came in which make the public authority responsible for assessing whether IR35 applies to a contract with a Personal Service Company (PSC). Where it does, the payment must be made net of PAYE and NIC and included on the public authority’s, or an intermediary’s RTI submission.
We are now in month 3 of the 2017/18 payroll cycle and HMRC’s automated system has started issuing some public authorities with SL1 forms in respect of contractors caught by IR35.
- If the worker has an outstanding student loan, and is included on the RTI submission of the public authority, HMRC’s system will expect there to be a student loan deduction attached to that payment.
- As the individual is a worker caught by IR35 and not an employee, the public authority is not required to deduct student loan repayments. The individual must deal with these on a self-assessment tax return.
- The SL1 notices and GNS messages should be ignored in these cases.
- If the payroll software automatically imports student loan notifications, a manual override may be required to avoid making erroneous deductions.
Links
IR35: workers are employees, are they not?
Personal service company (PSC) tax
RTI: Real Time Information for PAYE
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