Tax impact of scholarship award to dependant

Peterdrinkwater

This is my first post so apologies in advance for any etiquette faux pas.

I am a UK employee of a US based Company that offers a scholarship programme to dependants of its employees worldwide.

The value of the scholarship is $1,000 and is awarded based on the dependant's academic performance and limited to 10 awards across the world per year. The programme is administered by an independent third party in the US and application for the award is made by the dependant (not me) and the award is made directly to the dependant (not me). The management party does of course check that the applicant is a dependant of one of the Company's employees.

My daughter has been lucky enough to receive an award but my Company's UK based tax team have told me that because my daughter was only eligible for the award because I am an employee of the company that this represents a taxable and that I must pay UK tax & NI on the award.

Does this sound correct?

The award was paid directly to my daughter by the management organisation in the US. She is a student with no other income so I do not believe there is any financial tax impact on her.

The thoughts and guidance from the forum would be appreciated.

Wayne_O_Mac

A benefit provided by reason of the employment is taxable, yes. And if you're the employee and it's provided to a relative then it's taxable on you.

DigForVictory

Ask the US team who awarded it for tax advice. They will undoubtedly have come across it before &/or have access to others who have, & recently. (These things change.)

Offhand I can't see why you should be penalised for having a bright daughter but where you live, earn & are based for tax purposes may possibly overlap with where your daughter lives, earns & is based for tax purposes.

Plus there is a possible faint niff of envy - so you are absolutely right to double check noone's frowning "that doesn't seem fair" & getting a petty revenge on your income.

molerat

https://www.gov.uk/expenses-benefits-scholarship-family-employee/overview

Looks like you are stuffed

00ec25

DigForVictory wrote: »

Ask the US team who awarded it for tax advice. They will undoubtedly have come across it before &/or have access to others who have, & recently. (These things change.)

Offhand I can't see why you should be penalised for having a bright daughter but where you live, earn & are based for tax purposes may possibly overlap with where your daughter lives, earns & is based for tax purposes.

Plus there is a possible faint niff of envy - so you are absolutely right to double check noone's frowning "that doesn't seem fair" & getting a petty revenge on your income.

the OP is resident in the UK and is subject to UK tax rules, not US ones. The UK rules have not changed, it is a taxable benefit, pure and simple.

Offhand I don't know why you post if you do not know how the UK tax system operates?