A number of different types of payments may be made to students. This guidance applies equally to both UK and foreign students.
1. Reimbursement of expenses
Where relevant, e.g. on a travel grant, students may be reimbursed the actual costs of travel, subsistence and other expenses incurred via the Expenses process, subject to the requirements of the policy.
2. Payment for services
As with any engagement, an assessment should be undertaken as to whether the work should be treated as employment. If so, the student should be paid via payroll and treated in the same way for tax and National Insurance purposes as they are any other employee. In some cases, if the student is self-employed, it may be appropriate to pay via an invoice.
Scholarships may be referred to in a number of different ways, including 'bursaries, grants, exhibitions’ or similar. This guidance covers all relevant payments irrespective of their name.
Scholarships are 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:
1. The award is provided to support a student during a period of study – 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.
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 DPhil or equivalent. Postgraduate students are generally 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 if the undertake small amounts of paid work (no more than a few hours a week) e.g. teaching or demonstrating.
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 undertaking ‘sandwich courses’, where they are placed within an organisation as part of the course, are not covered by the exemption during their time at that organisation. Usually during this period any scholarship will be suspended and the student will receive employment earnings from the organisation in which they are placed.
- Research students undertaking a period of research in the laboratories or facilities of a non-educational organisation, 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 (excluding any University fee elements) does not exceed £15,480.
- The annual limit 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 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.
Payments for fees may be made directly to colleges on receipt of an invoice. The maintenance element of the scholarship is likely to paid directly to the student - a Payment Request Form can be used.