Expenses and benefits: scholarship for an employee's family member

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1. Overview

As an employer providing scholarships for your employees’ family members, you have certain tax, National Insurance and reporting obligations.

This also applies to exhibitions, bursaries and other educational endowments.

2. What's exempt

You don’t have to pay or report anything if the scholarship is ‘fortuitous’. This means that there’s no direct connection between the employee working for your business and their family member getting a scholarship.

A scholarship is fortuitous if all the following apply:

• the person with the scholarship is in full-time education
• the scholarship would still have gone to that person even if their family member didn’t work for you
• the scholarship is run from a trust fund or under a scheme
• 25% or fewer of the payments made by the fund or scheme are for employment-linked scholarships

3. What to report and pay

If the scholarship isn’t exempt, you must report it to HM Revenue and Customs (HMRC) and may have to deduct and pay tax and National Insurance on it.

You must:

• report it on form P11D
• pay Class 1A National Insurance on the cost of providing the scholarship

4. Technical guidance

The following guides contain more detailed information:

• scholarships provided for members of the family or household of a director or employee

• scholarships provided for members of the family or household of a director or employee: fortuitous scholarship awards