03 July 2019 
Caroline Jones, Employment tax director
Caroline Rai and Gary Saunders (PwC) and Caroline Jones (BUFDG) talked delegates through the issues surrounding bursaries, scholarships, stipends, fellowships and research grants. The overwhelming message was it doesn’t matter what it’s called it’s what the payments actually represent are key when determining whether payments can be made to recipients tax-free or not. This session is one that a number of BUFDG members were keen to have presented at the conference and this has become even more important given some recent announcements to changes to summer bursaries paid by research councils.
The message was that it is important to have a process in place for determining the source of the payment and what is expected by the university in return for the payment. There are various scenarios where the payments made be paid tax-free but the starting point in each case is whether or not there is an employment, if so then the payment would be taxable as earnings.
The tax exemption afforded by the scholarship exemption was discussed and the criteria for exemption was pointed out. The main points being that the individual must be in full-time education at a university and the payment must be below £15,480 per annum. It is possible to pay more but if this is the case clearance to make payments tax-free ought to be sought from HMRC.
Where individuals are in receipt of fellowship income the point is that status must be considered in the first instance. HMRC’s guidance on the tax treatment comes back to the status of the individual, which determines the treatment of the payment from a tax and NIC perspective.
There has been a general belief that research awards and fellowships granted from the EU are tax-free in the recipients’ hands. This is not the case, there is no blanket exemption.
There have been rulings from HMRC for individual universities confirming tax-free status for some fellowships or research grants, these cannot be relied on for all. BUFDG has become aware of the recent announcement from research councils changing non-taxable summer bursaries to taxable summer internships. This is being followed up and any information received by BUFDG will be shared.
This is a complex area and the message for universities is that there should be a process in place to identify recipients of awards and to determine, at the outset, where possible, what the tax status is.
