Is Tax Payable on Refund of Uni Fees ?

fairchi44

Hello
Have searched forums but can't find an answer so hope someone can advise
My son studied the GDL ( law degree) last year . He has since obtained a Training Contract with a Magic Circle law firm which also includes a refund of course fees paid . We paid the fees for the GDL out of taxable income , would the refund be taxed as it is payable to him ?
Thankyou so much in advance
F

purdyoaten

No. Unless he somehow claimed tax relief on the fees in the first instance.

It would be similar to, say, paying for a microwave out of taxed income, finding out that it did not work and claiming a refund. You would not consider the refund to be taxable, would you?

Regshoe

purdyoaten wrote: »

No. Unless he somehow claimed tax relief on the fees in the first instance.

It would be similar to, say, paying for a microwave out of taxed income, finding out that it did not work and claiming a refund. You would not consider the refund to be taxable, would you?

I'm not so sure, this isn't a 'refund' in the sense you have laid out, in fact I wouldn't call it a refund at all, this is an employer reimbursing a new employee for costs they have previously incurred.

Sounds more like a golden handshake, to be dealt with as pay, or at best a benefit in kind for settling training paid for by the employee. It would be different if they were already employed by the firm and they contracted for the training directly.

Assuming they are being taken on as an employee of a solicitors firm, or are a barrister in their first 6 then I expect they will be dealt with under PAYE/P11d.

For backing see EIM01235

http://www.hmrc.gov.uk/manuals/eimanual/eim01235.htm

And the referenced case law:

http://www.sbconsulting.co.uk/storage/Silva_v_Charnock__Inspector_of_Taxes__-_200.pdf

In that case the taxpayer won on appeal - but one of the important points (to me at least) is buried in point 12 on page 7 - that the contract of employment was agreed prior to the end of the course - they even reference uni costs as a comparative, as otherwise every employer could say part of the first years pay was to reimburse uni costs and be tax free!

fairchi44

Thankyou - this is very helpful

purdyoaten

Regshoe wrote: »

I'm not so sure, this isn't a 'refund' in the sense you have laid out, in fact I wouldn't call it a refund at all, this is an employer reimbursing a new employee for costs they have previously incurred.

Sounds more like a golden handshake, to be dealt with as pay, or at best a benefit in kind for settling training paid for by the employee. It would be different if they were already employed by the firm and they contracted for the training directly.

Assuming they are being taken on as an employee of a solicitors firm, or are a barrister in their first 6 then I expect they will be dealt with under PAYE/P11d.

For backing see EIM01235

http://www.hmrc.gov.uk/manuals/eimanual/eim01235.htm

And the referenced case law:

http://www.sbconsulting.co.uk/storage/Silva_v_Charnock__Inspector_of_Taxes__-_200.pdf

In that case the taxpayer won on appeal - but one of the important points (to me at least) is buried in point 12 on page 7 - that the contract of employment was agreed prior to the end of the course - they even reference uni costs as a comparative, as otherwise every employer could say part of the first years pay was to reimburse uni costs and be tax free!

Yes - I see that now. I took it that the op had paid for the course fees and the son had now received a refund as they were now paid by the new employer - obviously not!

Regshoe

purdyoaten wrote: »

Yes - I see that now. I took it that the op had paid for the course fees and the son had now received a refund as they were now paid by the new employer - obviously not!

As it happens the example in your reply was almost word for word what I was thinking when I saw the title!

fairchi44

Thanks - have printed out both documents .
My son was a non - law graduate and ( normally) when signing a training contract the law firm pays for both the GDL and the LPC before commencement . As we (he) had already undertaken the GDL , paid for by taxed , earned , income , its seems unfair to have to pay tax on the reimbursement , . He will also be paid by the law firm after the LPC for two years whilst training. We will have to see what happens
Many thanks and will let you know what happens .