Tax and sponsorship of MSc Degree

emmo709

Hi,

I'm a 37 year old married father of four and have managed to secure some funding to take a year off work to study an MSc. I mention the kids, as to do this course I need substantially more funding than the average student.

I have now secured £30k sponsorship from a third party, i.e. not my current employer, and they are happy to provide this with no requirement for me to work beyond the study period, however would own any work that I produce during this year, and the Uni have agreed to this.

The sponsoring company has asked me to look into taxation on this sum, I've called the Inland Revenue, but couldn't get a straight answer, has anyone any experience of above average sponsorship and how the Government class this in the case of tax? or any other advise? All would be gratefully received.

If more detail is required, please get back to me and I’ll endeavour to provide it.

Regards,

Dave

melancholly

usually sponsorship through a university is paid directly by the university as a stipend, making it tax free. i would imagine that any sponsorship by a private arrangement would not give any tax free status and counts as any income. there may be some other issues depending on how they are paying you - whether it's monthly like a salary or if they're paying the fees for you.

this will be very unusual and no doubt most of the people you ask won't know. it may well be worth ringing the finance office/student services at whichever uni you are going to since most people haven't even heard of tax free stipends for postgrad students! they might be able to help but i'd imagine you'll just pay tax like any income since the funding isn't coming through an educational institution.

emmo709

Thanks for the quick response. Your right, this is an odd situation and no one seems to know how tax applies.

I've rang the Uni, they weren’t very helpfu and just kept telling me that tax wasn't payable on fee's, over and over, despite me clarifying that wasn't what I was asking.


I'm likely to be paid 1/12th of the sum monthly for the year period and have found information on the IR website relating directly to employees. They can earn £15,480.00 tax free, but I'm not am employee and will not be issued a P45 from my existing employer (HM Forces). Again, an odd situation but If i can I could do with avoiding paying tax to make up the £10k loss in wages along with promotion etc that i'll also lose. But If I have too then so be it as an MSc in the long term will make it wortwhile.


Can anyone help??

melancholly

well how will your employer be paying you? if you aren't on their payroll system, how will that work?

various departments within the military do advertise that they sponsor all types of degrees (undergrad through to MBA). maybe finding a contact there would help you? there will someone in whichever branch of the forces that you're in who will have experience of this. they may just say that any private arrangement isn't their issue, but if they have established systems that you could come under, that might make it all a lot easier.

emmo709

I'm in the military and while the MoD sponsor lots of civvies, there's nothing for me in my rank (other rank, i.e. not an officer), the whole MoD sponsorship has other issues that are complicated. I have heard of RAF personnel getting paid time off for this sort of thing, but its a local commanders arrangement and the Army aren't that kind.

I've been given a 1 year career break, so no wages or anything else, except for medical cover (so I’m fit to come back after 1 year), but am held on strength in a temporary holding position.

This means that my wages/sponsorship don’t come from my employer, but a third 'sponsoring' party, i can’t work for them after the study as I MUST re-join the army.

A very odd situation, i know, but it always all three parties to achieve a mutually beneficial situation.


Me to get a MSc


The sponsor to get the output from my degree work


and the MoD to release one position for a year, saving a little of that budget and get me back a year later with more diverse quals and knowledge.



I dont want to cheat the system, but if i can reduce the tax burden to offset the wage cut it would make things easier for my family, as i also lose my families quarter.


Cheers.

orangeslimes

You probably need to take professional advice on the subject, as it seems a slightly complex situation. (Or maybe it isn't if you can find someone who knows these things - but they won't be on the other end of the phone at HMRC - unless you can convince them to put you forward to someone senior)

I am not sure how best you would find the right person...

tyllwyd

Would it be simplest to get the sponsoring company to pay your fees direct to the university, and then work for them as a second job on a one year contract. It doesn't help with reducing the tax paid - but then again, maybe that's just the way it is, and the reason you can't find any information on how to reduce the tax in this situation is because it doesn't apply?

Would you be entitled to tax credits? - if your income drops, you might be entitled to claim more for that year.

This is quite interesting although it is dated five years ago so I don't know if it still applies.
http://www3.imperial.ac.uk/pls/portallive/docs/1/4663910.PDF

BoGoF

Is this of any help

http://www.hmrc.gov.uk/manuals/bimmanual/BIM65151.htm