The Repayment of Teachers' Loans (RTL) scheme was run as a pilot from 1 July 2002 to 30 June 2005 by the Department for Education and Skills (DfES) to encourage teachers to take up posts in shortage subjects. It applied to England and Wales only and has now closed to new applicants.

The Scheme offered eligible teachers exemption from repaying their Student Loan (SL) for as long as they remain in the eligible employment. If they are still in an eligible employment after 10 years, the Student Loan is written off completely.

To qualify under the scheme, teachers had to take up eligible posts by 30 June 2005 and apply to have their Student Loan included in the RTL scheme by 30 November 2005 at the latest. Eligibility is decided by the Student Loans Company, not by HMRC.

In the case of a full-time employee who is accepted into the RTL scheme:

• if an employer is already making SL deductions, HMRC sends a stop notice (SL2)
  
  
• if the teacher leaves the employment, and the employer has received a stop notice, the employer does not enter a 'Y' at item 5 on the P45
  
  
• if the teacher moves to a non-eligible post and still has a loan outstanding, HMRC will send a start notice (SL1) to the new employer.

However, in the case of a part-time employee who is accepted into the RTL scheme and the employer is already making SL deductions, the SLC gives the employee a letter for the employer asking for the deductions to be suspended. It is not a stop notice and the software needs to allow deductions to be suspended so that, if the employee leaves the eligible part-time post, the P45 will show 'Y' at item 5. If the employee then takes another part-time job in an eligible employment, the employer starts to make SL deductions, as directed by the P45, but suspends the deductions if the employee obtains another suspension letter from the SLC.

HMRC has provided the following questions and answers on the scheme operation.

What should an employer do:

1. if a suspend notice is received for a person who has never been an employee?
   
   This should never happen because the SLC letter is issued to the employee who in turn must pass it to the employer for the payroll department. Any examples of this should be sent to Kevin O'Connor, the Operations Manager at SLC.
   
   
2. if the person for whom a suspend notice is received has now left the employment?
   
   If the employer had been making SL deductions during the person's employment, the P45 issued on termination should have had a 'Y' at item 5. Therefore, no action is required.
   
   
3. who is given a suspend notice by an employee but the employee is not liable for SL deductions?
   
   The employer should ask the employee to contact the SLC to find out why a suspend notice has been issued when there is no liability for SL deductions.
   
   
4. if the person is an employee but the details do not match those on the instruction?
   
   The employer should ask the employee to contact the SLC to find out why a suspend notice containing incorrect details has been issued.
   
   
5. if a stop notice or suspend notice is not received for a person who claims to have been accepted in to the RTL scheme?
   
   The employer should continue to make SL deductions and ask the employee to contact the SLC to find out why a stop notice or suspend notice has not been issued.

...back to 27 July 2006

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As the result of guidance given to us by HMRC in May 2005, we published information in a Newsletter at the time about the need to divide the annual £15,000 threshold used for the calculation of student loan deductions by 53 in a tax year that has 53 pay weeks.

We have now been informed by HMRC that that guidance was incorrect. HMRC has apologised and we, in turn, must apologise for giving incorrect information.

HMRC's explanation is as follows:

"The pay period for student loan deductions is always the same as the earnings period for NI contributions. Therefore in a weekly paid situation the earnings period is weekly, even where the week in question is week 53 for PAYE purposes.

There are no free pay periods with student loans and so deductions @ 9% of the weekly or, as the case may be, monthly excess earnings over the weekly or monthly pay period thresholds are due every week that an employee is paid. No separate deduction tables are therefore required for weeks 53, 54 or 56."

...back to 20 October 2005

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