HMRC warns against misuse of scholarship scheme
HMRC has warned family businesses against using the employee scholarship scheme to provide cheap university fees for their children.
Some accountants are recommending the merit-based award scheme, designed to support students during their time of study, as a way of providing student employees with up to £15,480 per annum tax free, the Telegraph reported.
Steven Crooke from Knowles Warwick advised: "Depending on circumstances, it may be possible to employ your child and pay this amount without incurring a tax liability."
Responding to Crooke’s claim, a HMRC spokesperson said: “There may be a benefit in kind (BIK) charge on the family member if the total earnings package attributable to the family member employee including scholarship payments exceeds £8,500 or if the family member is a director.
“Owing to the wholly and exclusively test scholarship payments to family members/connected persons are unlikely to be allowable as a business expense.”
The legalities of the scheme have divided accountants, with AccountingWEB members debating the issue in an AnyAnswers post.
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George Attazader advises that the scholarship scheme is not an expense incurred wholly and exclusively for business purposes in these circumstances.