U-turn on training tax refunds for NHS psychologists

Those who trained as clinical psychologists are among 1,000s of NHS workers who've reclaimed tax and National Insurance (NI) after a MoneySavingExpert.com investigation found many overpaid while taking part in the NHS Widening Access Training scheme.

Psychologists have accounted for some of the biggest tax and NI refunds we've seen, with one reclaiming £13,500 and another getting back £15,000.

However in a reversal of its previous policy, the taxman now says trainee psychologists' incomes may not qualify for refunds because payments they receive while training are generally considered to be salaries rather than scholarships.

HMRC's also refused to confirm what will happen to those who've already received refunds, and those who've been approved for payouts but not yet received them, saying only that it is "looking" at the issue.

However HMRC told us it's made no other suspensions or major changes to Widening Access Training (WAT) refunds, meaning other NHS workers can continue to claim as before - see our NHS Tax Reclaim guide for full help.

What has HMRC said?

An HMRC spokesperson told MoneySavingExpert.com: "Trainee clinical psychologists are usually paid a fixed salary for carrying out a wide range of duties in addition to their studies that includes taking part in clinical practice, such as carrying out interviews and assessments, running therapeutic groups and conducting research.

"They are not generally paid ‘scholarship income’ specifically for attending a particular course at an appropriate educational establishment, and do not therefore qualify for income tax and National Insurance refunds through the Widening Access to Training scheme.  

"We have asked employers to suspend payment of further refunds of income tax and National Insurance to current and former trainee clinical psychologists while individual cases are considered. The facts of each case can influence whether a refund is due.

"HMRC continues to work closely with employers to understand any variations there may be in the terms under which trainee clinical psychologist are engaged with trusts and boards."

Why are some NHS workers owed refunds?

The issue affects current and former NHS staff who took part in the WAT scheme at any point since 1999. Designed to broaden the professional knowledge of NHS workers including doctors, midwives, nurses and paramedics, the scheme sees them undertake full-time training at colleges and universities.

But the problem is that payments they got while training were taxed as if it was paid work. As they were on a training scheme which offered some exemption, some should never have paid the tax and national insurance which they did – and they can reclaim.

See full details of how to check if you overpaid in How do I know if I can reclaim?

Since we first highlighted this issue last year, we’ve heard from NHS workers who’ve reclaimed £1,000s thanks to the info in our NHS Tax Reclaim guide. HMRC figures show more than 11,000 applied for a refund between April and November last year alone.

'I'm worried they'll ask for the money back'

It's not yet clear what the changes mean for psychologists who've already had payouts, but we've heard from a number concerned they'll be asked to give the money back.

One MoneySaver wrote: "My wife, who trained to be a clinical psychologist, received both a tax and NI refund last year through the Widening Access scheme. The refund was over £15,000. It was like winning the lottery, so we spent it in number of things to treat ourselves that we wouldn't have bought otherwise.

"However, I'm now hearing from a few people that they have stopped giving refunds to clinical psychologists and may ask for the money back from clinical psychologists that got the refund.

"I'm really worried that they will ask for the money back when we've spent it. Can they do that?"

A current trainee who has successfully reclaimed emailed us: "I have now heard that the HMRC are saying that it was a mistake to have refunded trainee psychologists and that we are not eligible. They have said they will not be making any more payments to those still waiting for a refund. I do not know why they have decided this now as they have been processing claims for the last 18 months.

"Those of us who have already received a refund are concerned regarding whether we will be asked to pay it back or not. Many people have spent their refunds."