Student loan alert to agency PSCs inside IR35

Public sector PSC contractors inside IR35 and with student loans outstanding risk having their recruiters deduct repayments, unless contractors step in and tell the agencies otherwise.

Issuing this alert, Intouch Accounting said that agencies were correct to report contractors’ IR35-caught income as employment income to HMRC, and deduct tax and NI before paying the PSC.

But the tax adviser added that, unlike other employers, agencies should not make deductions for student loan repayments, despite paperwork issued by the Revenue indicating they should.

“Unfortunately, as HMRC considers the fee-payer to be your employer they will still issue a Student Loan Start Notice and GNS Employer Prompt,” said Intouch’s director Duncan Strike.

Agencies may be mistaken into thinking that they should deduct student loan repayments. They are wrong to do so and you should point this out to them if any deductions are made.”

Instead, and where PSCs are IR35-caught and suffer the fee-payer’s tax deductions, they are to make student loan repayments via their personal tax return, so must budget for this liability.

Jun 14, 2017