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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Employment income: scholarship income: meaning of at a university, college, school or other educational establishment

Section 776(1) IT(TOI)A 2005 (Section 331(1) ICTA 1988)

In order to qualify for the scholarship exemption under Section 776 (previously Section 331) the holder of the scholarship has to be receiving full-time education at a university, college, school or other educational establishment (see EIM06205).

An employer’s own internal training school or college, or such an establishment run by an employer’s association etc, should not be regarded as an educational establishment for the purposes of this guidance. Only recognised universities, technical colleges or similar educational establishments, open to the public at large and offering a range of courses both practical and academic, qualify. You should make enquiries where the nature of the establishment is not clear.

The education must take place at an educational establishment. If it takes place elsewhere then the condition is not satisfied and no exemption is due. An educational establishment is an establishment whose primary function is that of education. Where the primary function is other than education the condition is not satisfied and no exemption is due. This will be the case even if some education is carried out at the establishment.

As an example, a Ph.D. student may receive education at an establishment whose primary function is that of research. This is not an educational establishment and the Section 776 exemption will not apply. The fact that the students and staff are registered with a university will not mean the premises are an educational establishment.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)