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HMRC internal manual

Employment Income Manual

Employment income: scholarship income: directors and employees

Section 215 ITEPA 2003

The general exemption in Section 776 IT(TOI)A 2005 (previously Section 331 ICTA 1988) that scholarship income shall be exempt from income tax applies only to the scholarship holder (see EIM06205 onwards). Except for those in lower paid employment, the provision of a scholarship for the son or daughter of a director or employee will be treated as the parent’s earnings under the benefits code (see EIM30000 onwards). Section 215 ITEPA 2003 prevents the scholarship exemption at Section 776 (Section 331) from precluding such a charge.