Produced by Tolley in association with Philip Rutherford
  • 19 Oct 2021 23:23

The following Employment Tax guidance note Produced by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Scholarships
  • Introduction
  • Scholarships
  • The scholarship holder is a third party to the employer
  • The scholarship holder is a member of a family or household of an employee and it arises by way of that employment
  • The scholarship holder is a member of a family or household of an employee ― award unconnected to employment
  • Reporting requirements

Scholarships

Introduction

A number of employers make educational awards to individuals. For the individuals receiving the award, there is an exemption from tax in most instances. However, depending on the relationship between the individual and the employer, there may be a taxable benefit arising.

The main purpose of the legislation is to ensure that employers are not providing a benefit to employees by meeting the employee’s child’s education costs. If these amounts had been provided by way of cash to the employer then it would have been taxable, therefore meeting their child’s school costs on their behalf should equally be taxable.

Scholarships

There are a number of scenarios to understand when looking at the taxable status of the payments.

HMRC’s guidance on scholarship income is at EIM06205.

The scholarship holder is a third party to the employer

There is a general exemption from income tax for a scholarship under ITTOIA 2005, s 776 if the person receiving the scholarship is in full time education.

There are specific requirements for the nature of the institution in which the education takes place. Typically, the education needs to take place in a school, college, university or other recognisable form of educational establishment. If the scholarship relates to a facility run by the employer providing the scholarship, then the amount is likely to be regarded as earnings.

HMRC’s interpretation of what constitutes a suitable educational establishment can be found at EIM06230.

If the course in question is a form of sandwich course,

Access this article and thousands of others like it
free for 7 days with a trial of TolleyGuidance.

Think Tax.
Think Tolley.

Critical, comprehensive and up-to-date tax information

LEARN MORE LEARN MORE

Popular Articles

Utilising the capital gains tax annual exemption

Taxpayers may wish to consider basic tax planning arrangements in use the capital gains tax annual exemption. This type of tax planning is often reviewed at the end of the tax year.This guidance note first looks at the annual exemption in detail and then various tax planning strategies that might be

27 Oct 2021 19:10 | Produced by Tolley Read more Read more

Qualifying interest in possession trusts ― IHT treatment

Trust property, which is the subject of a qualifying interest in possession (QIIP), may become chargeable to inheritance tax on the following occasions:•on the death of the beneficiary with the interest in possession•on the death of the beneficiary within seven years after a transfer or lifetime

19 Oct 2021 23:12 | Produced by Tolley Read more Read more

Close companies ― overview

Close companies ― overviewMeaning of close companyThe tax rules for close companies are intended to address those companies that are closely controlled (ie by the owners and their families) and therefore could be used to manipulate the tax position of its activities and its investors. Therefore,

17 Nov 2021 13:50 | Produced by Tolley Read more Read more