My American employer is going to pay a reasonable sum of money directly into my son's bank account as a scholarship (he just had to fill in some forms). However, tax on that sum (40%) is going to come directly out of my salary.
As the money is going directly into his account, and he's 18+, do you think I stand a chance of claiming the tax back from HMRC? (Yes I can ring them but it might involve hanging on the phone for half an hour.)
|
|
If it's a scholarship, why is it taxable. I'm sure it wouldn't be from a British company.
|
It's income just like any other payment to you by your employer. That they are paying it directly to your son is neither here nor there nor are they concerned whether it is spent on your son's education or a foreign holiday. Your employer is obliged to deduct tax at source.
|
And if it's a scholarship, why would you need to pay tax at 40% on it?
I'd be asking the question to HMRC.
www.hmrc.gov.uk/manuals/eimanual/eim06205.htm
Last edited by: rtj70 on Fri 4 Sep 15 at 14:14
|
|
CG is right, but just in case its different for educational stuff I would definitely check directly with HMRC.
|
So if this must be taxed at 40% for Focusless, he's effectively giving 40% of the money to his son. At least he's losing 40% of the value of the scholarship. So if it was say £5,000, he's in effect giving up £2,000.
And if this has to be paid out of salary, is it monthly or one lump sum?
Definitely one for HMRC to answer.
|
>>So if this must be taxed at 40% for Focusless, he's effectively giving 40% of the money to
>>his son. At least he's losing 40% of the value of the scholarship.
Your calculations are wrong. If the scholarship is £5,000 this needs to be grossed up so that tax at 40% on the gross amount is £3,333.
>>So if it was say £5,000, he's in effect giving up £2,000.
No, OP's effectively had a £8,333 payrise.
|
HMRC's manuals in the hands of a layman can be very dangerous.
Try this instead which explains why the scholarship is indeed taxable:
www.hmrc.gov.uk/manuals/eimanual/eim30002.htm
|
|
I can understand why it would be considered as an income for Focusless' son, but why does Focussless need to pay tax on it?
|
|
Because it's income for OP, not for his son. Son only gets cash by virtue of OP's employment. It's a perk for OP as a part of his job.
|
>> It's a perk for OP as a part of his job.
That's it in a nutshell I guess; thanks.
|
|
So if it was an open scholarship potentially available to anyone, and one of the successful candidates just happened to be focusless' son, it would be tax-free?
|
>> So if it was an open scholarship potentially available to anyone, and one of the
>> successful candidates just happened to be focusless' son, it would be tax-free?
That would be my assumption too. Possibly same if limited to employees offspring but only if there's an arm's length objective and competitive assessment
|
>>So if it was an open scholarship potentially available to anyone, and one of the successful
>>candidates just happened to be focusless' son, it would be tax-free?
Yes. But you might have an uphill struggle to prove that to an inspector of taxes. All just a bit too convenient...
|
>> >> It's a perk for OP as a part of his job.
Does not sounds like much of a perk if Focusless will pay so much in extra tax.
|
>> Does not sounds like much of a perk if Focusless will pay so much in
>> extra tax.
>>
Is the glass half full or half empty?
I see it as Focusless being given a huge wedge towards privately educating his son.... so a big positive....(and good luck to him by the way).
|
>> I see it as Focusless being given a huge wedge towards privately educating his son....
1. Not sure about 'huge' - it's actually $4000, so around £1600 after tax? Definitely worth having though!
2. Not 'privately educating', just Exeter Uni.
>> (good luck to him by the way).
Cheers - he's looking forward to it, and I'm looking forward to a big reduction in our electricity bill :)
|
Its not a perk, its a benefit. And all benefits are taxable.
Unfortunate but entirely understandable.
|
>> Its not a perk, its a benefit. And all benefits are taxable.
perk2
pÉ™Ëk/
noun informal
noun: perk; plural noun: perks
a benefit to which one is entitled because of one's job.
|
>>(Yes I can ring them but it might involve hanging on the phone for half an hour.)
I usually have to ring the IR once a year while completing our returns, but I have never had to wait more than a few minutes to reach one of their staff.
|
|
Regrettably HMRC service standards have fallen since you last called them Clk Sec. The typical time on hold, if my clients are to be believed, is 30-45 minutes. Luckily accountants have access to the agent priority line, which is usually answered after a few rings.
|
>> Regrettably HMRC service standards have fallen since you last called them Clk Sec. The typical
>> time on hold, if my clients are to be believed, is 30-45 minutes. Luckily accountants
>> have access to the agent priority line, which is usually answered after a few rings.
Wife phoned HMRC today - 40 minutes on hold.
|
>> Wife phoned HMRC today - 40 minutes on hold.
For some reason Mrs B's 2015/16 personal allowance was split between her main employer and a University for whom she'd done £500 of one off freelance curriculum development stuff in 2014/15.
Waited 40m for a reply from HMRC but once on the case it only took a week for all her PA to be allocated to her main job. Epect similar myself as I'm about top take on paid employment at CAB. Should be dealt with at Basic Rate as my personal allowance is fully utilised against my CS pension but I fear it won't be that easy.
|
>> Wife phoned HMRC today - 40 minutes on hold.
>>
In which case they can get stuffed. Do as I do and direct it through the local MP. Boy do they listen up.
|
>> The typical time on hold, if my clients are to be believed, is 30-45 minutes.
Thanks, Alistairw.
|
>> perk2
>> pÉ™Ëk/
>> noun informal
>> noun: perk; plural noun: perks
>> a benefit to which one is entitled because of one's job.
I thought it was a contraction of perquisite - perk must now be a word in its own right.
Anyway - they have paid it to your son. He doesn't pay tax at 40% does he? I suppose the fact, if it is, that the benefit accrues as a result of your employment (especially if it is an entitlement rather than something your son 'earned' through his efforts to obtain it?) is what catches you.
A different HMRC link
www.hmrc.gov.uk/manuals/eimanual/eim06210.htm
|
>> He doesn't pay tax at 40% does he?
No.
>> (especially if it is an entitlement rather than something your son
>> 'earned' through his efforts to obtain it?)
Well, I said he only had to fill in some forms, but they did want quite a bit of detail as to what he's 'achieved' - we were able to list quite a few musical accomplishments. 4 other UK employees' kids got it, but no idea how many applied; I suspect it wasn't many.
|
I have question along same line but with different facts.
Mrs B has an interview next week for a PhD course. The subject is related to science education in schools and the institution is a well regarded former Polytechnic University. The deal is that if she's successful she will get tuition fees and a stipend of around £14kpa for 3 years.
Is the stipend taxable?
A quick Google suggests that it's not but possibly subject to some caveats about where the funding comes from. There are for example specific provisions in HMRC manuals relating to the Science and Engineering Research Council.
If her personal circumstances are relevant she's in her mid fifties, with PGCE, MA in Science Ed and several other professional qualifications plus 30 yrs at 'chalkface' and looking for a post classroom career in Education teaching/research.
Can any of our resident experts point me to chapter and verse?
|
PHd is tax free stipend
www.hmrc.gov.uk/manuals/eimanual/eim06271.htm
|
I've just written to HMRC, as after my wife has recently elected to transfer the unused part of her personal allowance to me, one pension provider has reduced tax deducted and another has taxed a previously untaxed sum!.
It will be interesting to see the response time.
Last edited by: Roger. on Sun 20 Sep 15 at 17:00
|
>> It will be interesting to see the response time.
Slight drift here, but I 'phoned the Pension Service on Wednesday with a query. A most helpful pension officer picked up within seconds, my query was answered there and then and a letter of confirmation was received on Friday.
|
>> >> It will be interesting to see the response time.
>>
>> Slight drift here, but I 'phoned the Pension Service on Wednesday with a query. A
>> most helpful pension officer picked up within seconds, my query was answered there and then
>> and a letter of confirmation was received on Friday.
I agree, I always found the Pension Service, in Newcastle-on-Tyne, to be absolutely terrific. Best of the lot by far.
|
>> I've just written to HMRC, as after my wife has recently elected to transfer the
>> unused part of her personal allowance to me, one pension provider has reduced tax deducted
>> and another has taxed a previously untaxed sum!.
>> It will be interesting to see the response time.
Letter posted 21/09/2015.
Reply (helpful & positive) received today, 16/10/2015, so IMO, a very reasonable turnaround.
Last edited by: Roger. on Fri 16 Oct 15 at 16:41
|
> A different HMRC link
>>
>> www.hmrc.gov.uk/manuals/eimanual/eim06210.htm
Different, but also irrelevant. The correct link I provided above: www.hmrc.gov.uk/manuals/eimanual/eim30002.htm
|
|
Now got the course documentation which confirms stipend is not taxable. Need to think about covering her NI contributions but I think I've got enough access to CAB manuals to sort that one out for myself.
|
|
Register as self employed, and pay Class II - £12 a month or something? - gives you full NI credit. Don't get a small earnings exemption cert, as then you only get the min credit, and anything you pay in will be worth much more in pension. You do have to fill in a tax return, but it's not that arduous.
|
You need 35 years contributions for a FULL State Pension
Workout, or rather ask Newcastle, how many years your wife has and work out how many more years she is likely to work. You may be able to may modest payments for the length of the secondment.
My local Indie is retiring - worked 50 years, 13 employed, 37 self employed. I do not know how much he earns "but he is comfortably off". He turns 65 in November and all he gets is the basic £115 as all his NHI are really self-employed.
If he turned 65 after April 6th 2016, he would have been entitled to £155!!!
An extra £40 / week for the rest of his life - he is not a happy man.
If, for 37 years, he had ran as a Ltd company, and been an director / employee, he would have paid less tax & NI and would have been entitled to a higher pension
|
tax question - neiltoo
