No liability to tax or NIC arises in respect of income from a scholarship held by a person in full-time education at a university, college, school or other educational establishment1. 'Scholarship' includes an exhibition, bursary or any other similar educational endowment2. HMRC will usually consider a graduate registered as a full-time student for the degree of PhD or equivalent to be receiving full-time instruction (even where the student undertakes a small amount of paid work, for example, teaching or demonstrating)3.
The exemption is provided to the scholarship holder alone; if the scholarship is provided by reason of another person's employment, that other person can be liable under the benefits code, see ITEPA 2003, ss 201–215 (Pt 3, Ch 10) (Taxable Benefits: Residual Liability to Charge)4; see further E4.666.
General employment status principles for students
Employment status with the third party must be ascertained according to general principles so that, for example, an existing employee who is paid by their employer to undergo a degree
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