Family staffed firms warned about scholarship expenses scheme

HMRC has warned small family run businesses that they should not use the employee scholarship scheme as a way of obtaining cheap university fees for their offspring.

Some accountants recommend the merit-based award scheme as a method of providing a tax-free income of up to £15,480 a year to students while they are studying.

Steven Crooke for example, from Knowles Warwick, said depending on circumstances, you could employ and pay your child this amount and not incur a tax liability.

However, a spokesperson for HMRC explained that the family member may incur a benefit in kind charge if the total earnings package was more than £8,500 – including the scholarship payment. The employee scholarship scheme is unlikely to be allowed under the category of business expenses if it is utilised on behalf of a family member.

Accountants are divided about the legalities of the scheme. George Attazader explained that it is expense solely and exclusively for business purposes. James Helleyer also advised families not to use the scheme.

HMRC has said it examines the facts behind each case closely to determine whether a company can sponsor a family member for a scholarship.

Meanwhile, there appears to be a shortage of accountants in Ireland with financial services firms struggling to source candidates with the right skill-set. In some ways, this is entirely their own fault because the Big Four accountancy firms made hundreds of newly qualified accountants redundant in 2009.

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