1.In its letter to the Department for Education of 27 February 2019, the Committee requested a memorandum on the following point:
Identify the power for the sub-delegation to HMRC in regulation 3(b).
2.This memorandum has been prepared by the Department for Education.
3.The Department respectfully takes a different view to that of the Committee and considers that regulation 3(b) of the Education (Student Loans) (Repayment) (Amendment) Regulations 2019/189 does not (and was not intended to) provide for sub-delegation to the HMRC.
4.Regulation 3(b) of the Education (Student Loans) (Repayment) (Amendment) Regulations 2019/189 amends Regulation 17 of the Education (Student Loans) (Repayment) Regulations 2009/470 so that from the tax year 2019/20, for borrowers who repay via employer deductions, the date when a student loan repayment will be considered to have been paid by the borrower and received by the Authority or loan purchaser will be the day on which it is deducted by their employer or “where an adjustment is made in relation to the deduction, such other day as HMRC specifies in order to take account of that adjustment”.
5.The purpose of this change is to ensure that repayments of student loans made via deductions from employer salary payments will in future be credited to borrower accounts in a way that more accurately reflects the date that they were actually deducted by employers.
6.In light of enhanced information sharing between HMRC and the SLC it will be possible for interest to be applied to the profile of monthly repayments actually made, rather than on the basis of estimated monthly repayments (as happens at present). This should avoid a situation in which interest is applied to an inaccurate estimated balance of the amount still to be repaid.
7.In order for this system to operate properly, adjustments to salary deductions may be required in certain circumstances. For example, to correct an error in the amount deducted from the outstanding balance or the timing of a deduction recorded on a borrower’s account. In most cases, this adjustment will be undertaken and applied to the original and/or correct date of deduction and it will be that date on which the adjustment is treated as having taken effect. In this type of case HMRC will inform SLC that the relevant date is the date of the original deduction by the employer.
8.However, in exceptional cases, it may not be possible to backdate an adjustment to the date of the original deduction in this way. For example, where it is not possible to identify exactly when an error took place or where an error does not take place at a single point in time but continues over a period or is intermittent. In such cases, HMRC will notify SLC, to whom repayments of students loans are made, of the relevant date to be associated with that adjustment. It is this point that the relevant part of regulation 3(b) seeks to deal with.
9.In such exceptional cases, therefore, a date other than that of the original deduction will need to be notified by HMRC to the SLC to give effect to the adjustment in for the purpose of repayment. The relevant date in such a case will follow from the factual circumstances of the case and, consequently, it is anticipated that HMRC may have to notify different relevant dates in different cases to reflect different factual circumstances.
10.In this context the words “such other day as HMRC specifies” in regulation 3(b) were intended only to reflect this point i.e. that a different date to that in new regulation 17(ca)(i) of the 2009 Regulations will sometimes be notified by HMRC to the SLC to ensure the accuracy of repayment records and corresponding calculations of interest. That date will follow from the particular facts. Accordingly, it is not anticipated that HMRC will exercise a discretion, for example, by deciding what that date should be. Instead, it will notify the SLC of a factual matter i.e. that a different date to that of the original deduction is to be recorded on a borrower’s account.
11.However, on reflection, the Department can see how the drafting of regulation 3(b) might be read to imply the creation of a discretion. Further, the Department can see how this provision could have been drafted differently to avoid such an implication.
12.With that in mind the Department undertakes to revisit the drafting at the first available opportunity to remove the implication referred to in paragraph 11.
Department for Education
5 March 2019
Published: 15 March 2019