PAYE23035 - Employer records: employer types: school funding arrangements

The Department for Education and Employment changed the funding arrangements for schools in April 1999.

Prior to April 1999 Local Education Authorities (LEAs) paid staff on behalf of most schools and operated a PAYE scheme in respect of those staff.

Since April 1999, individual schools have been able to opt to hold the payroll funds for their own staff, and pay their staff direct. Where they do so, they become the employer for PAYE purposes. Under these circumstances a new PAYE scheme is opened in the PAYE Employer Office.

If a LEA administers the payroll but does not pay the staff (that is, the LEA acts as a payroll agent); the responsibility for PAYE remains with the school, as for PAYE purposes the school remains the 'person' paying the earnings. Any enquiries regarding 'sub-accounts' of LEAs should be referred to the Department for Education and Employment. The treatment of teachers pensions remains unchanged.

Grant Maintained Schools (who hold their own payroll funds and operate PAYE schemes) became Foundation Schools under these new arrangements and became part of the LEA. If they decided to continue to hold their own payroll funds, no change to their existing PAYE scheme was necessary.

If you are required to open a PAYE scheme for a LEA school that has opted to hold the funds for its own payroll, follow the guidance at PAYE23036.