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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: awards to researchers by the European Union

The European Union provides grants for EU postgraduate and post-doctoral researchers to undertake research training in EU member states. Researchers are sometimes informed, either by Brussels or the research organisation they are working for, that payments under these schemes are exempt from income tax in the UK. As a general proposition this is not true. There is no wholesale exemption from income tax for these research awards so each case must be considered on its facts. There are a number of schemes under which these grants are provided.

Status

Employment status may be an issue for researchers. It is important to get a clear understanding of the nature of the researcher’s relationship with the host university as the first step towards deciding on liability to income tax and NICs.

Researchers may be:

  • Students - in receipt of scholarship or similar income. This is exempt from tax by virtue of Section 776 ITTOIA 2005. (See EIM06205 and subsequent.)
  • Employees - in receipt of salary or wages from the host university that employs them. Earnings should be subject to PAYE and NICs.
  • Self-employed professionals - in receipt of trading income
  • And maybe a mixture of 2 or 3 of the above - post graduate students may receive scholarship payments to help them fund their studies but in addition may be employed part-time by the university to, say, supervise undergraduates, give lectures or assist on research projects.

If a university payroll department asks whether payments to a researcher should be subjected to PAYE you should explore the issue of status as a starting point. It may be necessary to separate out elements of payments that come from different sources within the university institution. Some may be earnings and some may not.

Framework Programme 5

Researchers engaged under Framework Programme 5 arrangements normally fall under two broad categories known as Category 20 and Category 30. The former category is for postgraduate students and the latter for post- doctoral students.

It is not possible to give categorical advice about the tax treatment of any grant received. This will depend in particular cases upon the terms and conditions under which it is given to the student. However, Category 20 students are usually equivalent to PhD students and should normally be dealt with in accordance with EIM06225. Category 30 students are likely to be Fellows and you should normally deal with any claim for exemption in accordance with EIM06250. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

FP6 Human Resources and Mobility Programme

Framework Programme 6 is now in force, but researchers recruited/awarded under FP5 still work under FP5 arrangements. The category titles for researchers recruited/awarded are different under FP6 compared to FP5. Fellows funded under FP6 are recruited either under:

  • an employment contract/ fellowship with full social security coverage or
  • a fixed-amount fellowship with minimum social security coverage.

In both categories research fellows are paid three basic allowances:

  • a “living allowance” - this is the basic salary or stipend
  • a “mobility allowance” - a cost of living allowance, depending on family situation
  • a “travel allowance” - to cover their return flight to their location of origin

In some fellowships a “career exploratory allowance” - a fixed sum for them to spend on additional courses etc. is also paid.

It is not possible to give simple advice on the status of the individuals in these categories. Early stage researchers and experienced researchers can be engaged under either category.

If you establish that a researcher is employed the three allowances listed above are general earnings because:

  • The “living allowance” is by definition salary or stipend therefore earnings
  • The “mobility allowance” and “travel allowance” are round sum allowances paid whether or not the researcher undertakes business travel or return journeys to the home state.

The allowances should be subjected to PAYE at the time of payment. If you receive a claim that some or all payments are exempt from income tax you should request the relevant documentation and make a decision on the facts. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)