26 January 2022 
Julia Ascott, Employment Taxes Specialist
With a massive thanks to Paul Moreels at KPMG, Marie Christie (Liverpool), Ruth Evans (Warwick), Jon Gorman (Portsmouth) and Graham Gustard (Cambridge) for their insightful input into a tricky area... we are pleased to publish BUFDG guidance paper on stipends, bursaries, scholarships, etc.
This paper sets out the general rules on the taxation of stipends, HMRC's current position and where complexities arise. The vast majority of stipends will not be taxable, however, there are scenarios where HMRC would take a different approach because the student is carrying out day to day activities that might create an employment relationship with the university (where one doesn't already exist).
This view has been exacerbated by the fact that the HMRC exemption (for stipend payments where there may be an employment relaionship) remains at £15,480 whilst the UKRI stipend for the 21/22 year has increased to £15,609. Potentially meaning that where you believe an employment relationship may be created by a student because of the duties they are carrying out (perhaps taking a few classes or marking for a faculty member), the whole stipend may be at risk of being classed as employment income.
BUFDG will be lobbying HMRC to raise their exemption in line with UKRI standard rates (at the very least) but the point remains that there is increased risk in paying stipends to students without first appreciating whether they knowingly or unknowingly carrying out employment activities.
If you have any feedback on this guidance or would like us to raise issues with HMRC directly on your behalf (anonymous basis), please contact Julia Ascott. If you need further advice on stipends, bursaries, scholarships or fellowships, please contact your adviser or Paul Moreels from KPMG (see Employment Tax Key Contacts for contact information) who is current helping a number of universities on this.
