Posted by Tax Innovations on 19 Oct 2011

HMRC Warns Against Misuse of Scholarship Scheme

HM Revenue and Customs (HMRC) is warning businesses about the use of a employee scholarship scheme as a means of putting family members through college at the expense of the taxpayer.

Under the scholarship exemption rules, the cost of university tuition fees for an employee can be tax deductible and so business owners are using this to ease the cost of university education.

HMRC is now looking into this practice and will be paying close attention to whether the education expenditure is incurred for business rather than the interests of a director or family member.

If any expenditure is found to have been incurred for an individual’s benefit, there may be a benefit in kind tax liability to the employee should the employees total annual remuneration package exceed £8,500. This includes salary / wages and any other benefits including scholarship payments.

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More information can be found on the HMRC website, but should you wish to discuss any part of this article, please do not hesitate to contact us for an initial consultation.