Income Tax (Earnings and Pensions) Act 2003 section 214

Scholarships: cost of the benefit

Section 214 provides a special rule for calculating the taxable cost of a scholarship that is provided from a trust fund as an employment-related benefit.

• The normal cost-of-benefit rule in section 204 does not apply to scholarships provided from a trust fund
• Instead, the cost of the benefit is the total of actual payments made from the trust fund to the scholarship holder
• This prevents the entire capital of the trust fund being treated as the cost of the benefit
• Only the amounts actually received by the scholar are brought into the tax charge