Public Sector PSC Contractors inside IR35 – Check for student loan deductions!

If you’re working inside IR35 in the Public sector, your agency or end client will correctly report your income to HMRC as employment income and deduct income tax and national insurance before paying your limited company. However, you may find that they also deduct Student Loan repayments. This is not correct.

Why is this happening?

HMRC considers the fee payer to be your employer, and accordingly they will issue a Student Loan Start Notice and GNS Employer Prompt. Your agency or client may understandably interpret this to mean they should deduct student loan repayments, as well as tax and NICs.

However, despite the fact that HMRC will see the fee payer as your employer, you are actually still employed by your PSC. So even though HMRC will issue paperwork instructing them to do so, your agency/client should not deduct student loan repayments.

What should you do?

If student loan deductions have been made, or you’re concerned that they will be, talk to your agency or end client to make sure they’re aware.

You will need to make any student loan repayments via your personal tax return so you should also ensure you budget for this if appropriate.

If you have any questions about working inside IR35 or to find out how Orange Genie can help, please call our expert team on 01296 468 483 or email info@orangegenie.com.

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