Scholarship, stipend, bursary, oojamiflip or thingy?

As the title alludes to, the provision of scholarship income, via a stipend or bursary may not actually be called a stipend or bursary at your university.  It is important to understand each aspect of payments made to ensure that you are treating them correctly for tax/NIC purposes. 

As a quick reminder, bursaries, stipends or whatever you want to call them are supposed to do no more than compensate employees (who are studying full-time at the university) for lodging, subsistence and travel costs.  Anything in excess of the exempted amount may be treated as employment earnings by HMRC unless you can provide supporting evidence that the travel & subsistence costs were actually higher than the exempted figure.

One of the issues some of our members have raised recently is that grant providers are advertising a bursary that exceeds the tax/NIC exemption - e.g. UKRI's recent request for veterinary degree students offering a stipend of over £24k or the Newton International Fellowship of £24k. Nothing on the links provided explain an increased cost in travel & subsistence (although you could possibly understand it if you are looking to engage with an overseas candidate).  This could therefore cause confusion for recipients who may not expect to be subjected to tax/NIC on these payments.

BUFDG raised this with HMRC to understand whether UKRI et al have gained agreement from HMRC that these can be paid without tax implications OR whether the original exempted amount of £15,480 had been extended without us knowing.

HMRC have provided the following commentary:

I can confirm that there is no change to the limit set out in HMRC guidance. This means that any bursaries that exceed £15,480 would not be exempt from income tax under Section 776 IT(TOI)A 2005 - Statement of Practice 4/86. The rate of £15,480 was set as HMRC considers payments above this level would exceed what might be reasonably described as a scholarship or training allowance.

However guidance at https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim06220 does state if the rate exceeds £15,480 then HMRC may look at the arrangements in detail.

I would advise that universities must follow the published guidance but if an individual, university or funding body considers there are justifiable grounds as to why an award above the limit should be exempt they would need to contact HMRC providing details and full reasoning for their view for HMRC to consider. There should be no assumption that the award of a higher stipend on the basis of previous qualifications would be accepted as meeting the condition for this exemption.

I hope this provides certainty for your members.

Next steps

Given HMRC's statement, it may be prudent to review and question those arrangements that currently exceed the exempted amount.  This may result in queries being raised with funding bodies to assess their calculation, but as HMRC states, if the increased figure is only because you want to attract certain students, it doesn't seem to suggest an alignment with travel & subsistence costs.

If you are aware of any other organisations offering over the going exempted rate - please let me know.