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Income Tax (Earnings and Pensions) Act 2003

Section 212: Scholarships provided under arrangements entered into by employer or connected person

831.This section extends the circumstances in which a scholarship is a benefit provided by reason of the employment.

832.Subsection (1) derives from section 165(2) of ICTA. A scholarship is an employment-related benefit by virtue of section 201 of this Act if it is provided by reason of the employment. That would not be the case if the provision of the scholarship did not fall within the normal meaning of “by reason of the employment” because of the way in which it was provided. This section extends the meaning of “by reason of the employment”.

833.Subsection (2) derives from the closing words of section 165(2) of ICTA. It prevents claims being made that the scholarship is not within subsection (2)(b) because no cost to the employer or connected person is involved.

834.Subsection (3) is a minor change to the law. It is possible that the extended meaning of “by reason of the employment” could result in arrangements made by individuals to provide for the education of members of their family or household being employment-related benefits because of the terms of subsection (1) of this section. An example would be an educational trust set up by a grandparent and the parent of someone who benefited from the trust was an employee in the grandparent’s business. See Change 39 in Annex 1.

835.Subsection (4) prevents subsection (1) from disapplying the opening words of section 201(3) of this Act.

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