An employee is taxable on the cost of any scholarship from a trust fund which does not satisfy a 25% distribution test or which is paid because of an employee’s employment. (ITEPA 2003, sections 211-215).
A married woman received payments from the Home Office to sponsor her training as a probation officer on a postgraduate course. The Revenue assessed the payments to income tax and the taxpayer appealed, contending that the payments were exempt as scholarship by virtue of what is now section 776 Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005). The court held that s.776 ITTIOA 2005 conferred an unqualified exemption on the payments in question. Walters v Tickner, CA 1993, 66 TC 174.
In a child allowance case, a taxpayer made payments to his student son under a deed of covenant and contended that these were income to which the student was entitled as holder of an educational endowment. This was rejected by the court, holding that the deed of covenant could not be treated as an educational endowment. [Gibbs v Randall, Ch D 1980, 53 TC 513]. See ‘Related links’.