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HMRC internal manual

Employment Income Manual

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Employment income: scholarship income: meaning of full time instruction

Section 776 IT(TOI)A 2005 (Section 331 ICTA 1988)

Individuals registered as full-time students at educational establishments on courses up to, and including, university undergraduate and comparable levels may normally be regarded as receiving full-time instruction for the purposes of the scholarship exemption under Section 776 (see EIM06205).

Certain university and college courses, notably sandwich courses, require students to undertake periods of work experience away from the university, etc. during the course. The educational award is usually suspended during such periods. Instead the student receives his or her salary or wages from the employer. These are taxable earnings to which PAYE should be applied in the normal way, if appropriate. No exemption arises under Section 776, as the student will not, during the period of work experience, be undergoing full-time instruction at the educational establishment.

See EIM06235 as regards students released by employers to undertake educational courses.

University graduates registered as full-time students for the degree of Ph.D. or equivalent may normally be regarded as receiving full- time instruction on the grounds that their research work is subordinate to the main object of acquiring training in research methods. This will still apply even if they undertake small amounts of paid work, for example, teaching or demonstrating.