6. Payments to Students, Visiting Academics, and Volunteers

See also:

6.1 Scholarships and bursaries

(a) Definition and treatment

Income from scholarships (which may be referred to as ‘scholarships’, ‘bursaries’, ‘exhibitions’ or similar) is exempt from income tax if the individual is in full-time education at a university, college, school or other educational establishment. Practically, this means that the following conditions must be met.

Conditions for tax exemption for scholarships:

1. The award is provided to support a student during a period of study.

  • Valid scholarships can only be provided to students whilst they are studying. An award made after the course is complete is not a valid scholarship.

2. The holder does not receive the payment as a result of being related to a member of staff within the institution concerned.

  • If a scholarship is provided purely because the recipient is related to a member of staff then it is not a valid scholarship.

3. The holder is a full-time student on an undergraduate course, or a registered full-time student on any postgraduate course up to the level of Ph.D. or equivalent.

  • Postgraduate students generally are considered to be receiving full-time instruction on the grounds that their research work is subordinate to the main object of acquiring training in research methods. This still applies even if they undertake small amounts of paid work e.g. teaching or demonstrating.
  • ‘Small amounts’ of work in this context is generally considered to be no more than a few hours per week.

Where recipients of scholarships work, even in a limited fashion, for the University, condition 5 below must also be considered.

4. The holder is receiving their education at a university, college, school, or other educational establishment.

  • Students who undertake ‘sandwich courses’, where they are placed within an organization as part of the course, are not covered by the exemption during their time at that organization. Usually during this period any scholarship will be suspended and the student will receive employment earnings from the organization in which they are placed.
  • Research students who undertake a period of research in the laboratories or facilities of a non-educational organization, are not considered to be in full-time education for the duration of this research.
  • An educational establishment will include those facilities where a university may have shared occupation of a site with a third party, but teaching is not limited to solely those areas occupied by the university e.g. teaching hospitals.
  • Fieldwork does not invalidate this condition as long as it is provided as part of a course that otherwise takes place within an educational establishment.

5. If the holder of the scholarship is also an employee of the University the annual value of the scholarship (excluding any University fee elements) does not exceed £15,480.

  • The annual value limitation only applies where a scholarship is provided to an employee. No limit exists where there is no actual or implied employment relationship between the University and student. Where a student also undertakes paid work for the University, however, there is a risk that this may be construed by HMRC as requiring the student to satisfy this additional condition. It is important, therefore, that the terms of any scholarship award are distinct from the terms of any employment that the student may undertake for the University, i.e. there must be no requirement or obligation as a condition of the award for any element of paid teaching or other work to be undertaken, although it is allowable for applicants to be invited (voluntarily) to undertake such activities separately.

Further information on students and work is provided in section 6.2.

(b) Payments not considered scholarships

The following payments are not usually considered to be scholarships for the purposes of tax exemption and, as such, are subject to tax and National Insurance in the same manner as basic pay:

Payments that are not scholarships:

  • Loans made to employees undertaking educational courses;
  • Payments to students made under Deed of Covenant;
  • Scholarships awarded to the children or relatives of staff purely by reason of the employment of the staff member concerned;
  • Teaching ‘fellowships’ or similar arrangements where there is an obligation to undertake work as part of the condition of the award; and
  • Teaching, merit or clinical excellence awards.