I'm being asked to fill in a P46 as a student. Is this right?

[AnnieLobeseder]

I get a childcare subsidy through the Institute where I study, which used to be part of our student stipend. However, they've started to pay this subsidy through payroll, and last month we got the full set of taxes lopped off it, even though we don't pay tax as full-time students.

HR/Payroll are telling us it's because 'computer needs a tax code', and defaults to full tax.

So they're asking us to fill in a P46 (which lists the Institute as our employer, instead of our place of learning, and say this will enable them to put us on a lower tax rate.

Surely this isn't right? Won't that in effect be telling HMRC that I'm employed when I'm not. We're worried about things like our council tax student discount being affected if we tell HMRC we're employed.

Anyone know if what they're suggesting is kosher or not?

Doesn't sound right to me, although its true that if you tick the box "This is my first job since last 6 April..." (how can you do that - it isn't a job!) you will be put on a code that means you won't pay tax on up to £7,475 of earnings (and should get the tax back that was deducted previously).

Not sure what to recommend to sort this out properly though - is there someone in student services or the students' union you can speak to?

... ah, you aren't a Research Associate or other person actually employed by the institution are you? No, you can't be, otherwise you would already be on the payroll.

It's tricky because there are loads of students at the institute, and it's where we do all our work, but because of logicstics, ie, the institute not actually being a uni, we're all registered at various unis all over the country. And the unis have nothing to do with our stipends or subsidies - that all comes from the research council we're with.

There's an academic committee, but since it's just made up of scientists and students, everyone is clueless!!

I guess I could ask someone at the research council, but who?!?!

And no, we're not on payroll as anything but full-time students.

I've been retired for some time so it has been a few years since I was involved with payroll. Also, as you aren't actually employed this may be a bit of a red herring.

But, when we had students who worked during the summer holiday they completed a P38S (I think) and not a P45. IIRC that included a declaration that they were a full time student.

Check the HMRC website and see what it says about the P38S.

It gets trickier for me because I've only been a student for 6 months, so I will be over the £7000 or so tax bracket as I earned more than than in April-Sept last year. Or would it only count from this April just gone?

The tax year runs from 6th April XXXX to 5th April YYYY so what you earned before 6th April 2011 won't count in the current tax year. Unless you underpaid tax last year and that might be recovered through an adjusted tax code this year.

Thanks, Hope. I've e-mailed that form to HR to see what they make of it. It does seem to be more relevant than the P46.

Nooooooooooo the P38(S) is a total red herring, the point is that these payments shouldn't be subject to PAYE at all because they are not earnings from employment (and if they are earnings from employment, so is the rest of the stipend so it would already be paid through payroll), a P38(S) is not supposed to be used for employment during term time and in any case a P38(S) will achieve exactly the same PAYE result as a P46 with the 'first job since...' box ticked anyway.

How did they pay them previously? Why have they changed this?

We've gone from Institute-based payroll/procurement/HR to a Research Council-based payroll/procurement/HR which is off-site. And it's been a total cock-up on every level!!! For some reason the powers that be decided that our stipend should be separate from any other payments we get on top like childcare and housing subsidies. Only two of us get the childcare allowance, but the rest of the students have had trouble with other payments.

This is the latest message from Payroll:

"Although you are not strictly employees, as we making payments to you outside of your stipend, we do need to ensure that you are on the correct tax code as these are taxable allowances/ benefits. If we do not get you on the right code you will continue to have tax deducted through the payroll because the code will not take into account your personal allowance. Therefore, please can you complete the P46 attached, ticking the most appropriate options available."

I really don't know what to do. Would I be lying to HMRC by filling this out, or is it all above board? Does anyone know?

Help please!!!

This is a very complex area and it is impossible to say whether they are right or wrong without knowing all the detail. However, according to the relevent HMRC guidance EIM06205 et. seq. there are few circumstances where income of this nature is taxable, and even fewer where it is subject to PAYE.

But persuading them of that is not going to be easy, so I think you should choose the path of least resistance and just fill in the P46. You won't be lying to HMRC (assuming you don't have another job).