BIM65151 - Research grants and fellowships: overview
Research grants and research fellowships paid to individuals which are not chargeable as employment income (see EIM06265 onwards) may give rise to liability to Income Tax in the following four situations;
- If the individual has an existing profession to which the award can be attached, the award is a receipt of that profession. The case of Duff v Williamson [1973] 49TC1 lends support to this view.
- The individual may have a vocation as a researcher, so that the award is a receipt of that vocation. 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.
- The award may be chargeable as an annual payment. 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, the award is unlikely to be chargeable as an annual payment but is more likely to be trading income or miscellaneous income. In cases of doubt or difficulty, further advice may be obtained from BAI (Business Profits).
- There may be a liability under the sweep-up charge to Income Tax on miscellaneous income (see BIM100101 onwards), if the sums are paid under a contract and this is an enforceable contract for services but the activity does not constitute a profession or vocation (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 liability under the sweep-up charge even if there is a contract (see Lord Denning at page 321 in Scott v Ricketts [1967] 44TC303).
Any case in which one of the four situations appears to apply but the liability is disputed should be referred to CTISA (Technical) before a hearing before the Tribunal is considered.