BIM65151 - Research grants and fellowships:
overview
Research grants and research fellowships which are not
chargeable as employment income (see SE06200 and following) may
give rise to liability under Schedule D. Essentially, there are
four situations in which a research grant might be assessable under
Schedule D.
- If the award can be viewed as an annual
payment then there may be liability under Case III. It would be
necessary to show that the payments were capable of being annually
recurring, paid under a legal obligation and pure income profit in
the hands of the recipient, before such liability could be
attached. Where services are provided by the recipient in return
for the award, even if these amount to no more than the production
of a report at the end of the period of study, Case III is unlikely
to be a possibility. In cases of doubt or difficulty, further
advice may be obtained from Business Tax (Technical).
- If the individual has an existing Case II
profession to which the award can be attached, there will be
liability under Case II on such income. The case of Duff v
Williamson 49TC1 lends support to this view.
- If the individual has a vocation as a
researcher, Case II is a possibility. The situation envisaged is
that of a student who has a series of research awards spread over a
number of years. Such cases will be rare.
- For there to be a liability under Case VI
it is necessary to establish that sums are paid under a contract
and that this is an enforceable contract for services (see
Brocklesby v Merricks [1934] 18TC576). This is likely to be the
situation where particular work is carried out for the paying body
and it receives some service from the student such as a written
report or articles for publication. However, if the paying body
does not receive significant services there cannot be Case VI
liability even if there is a contract (see Lord Denning at page 321
in Scott v Ricketts [1967] 44TC303).
- Any case in which there appears to be
liability under Schedule D but the liability is disputed should be
referred to Business Tax (Technical) before a hearing before the
Commissioners is considered.
