Student and Form P38S - HMRC press release gives tax guidance for students

Written by Ian Congreave - Filed under: P38(S) - Students on September 9th, 2009

Hi! If you're new here, you might want to register for free email updates. Just use the form at the top of the sidebar. Thanks for visiting The Payroll Blog!

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.

Further information:
Getting educated about tax

The UK Payroll News is sponsored by HRD & Payroll Solutions

Written by Ian Congreave -

Filed under: P38(S) - Students on September 9th, 2009