Bursary, Scholarship & Prize Money for Musicians & Performers
This is a topic that I have been asked about this year on my tour round music & drama colleges, so I thought it would seem appropriate to jot down a few lines.
At some stage in your musical or performing career, you may be lucky enough to be awarded a bursary, scholarship or win performing prize money. But are you sure you understand the tax implications of these?
Bursaries and scholarships are usually tax-exempt provided the person is in full-time education at a recognised university, technical college or similar education establishments that are open to the public at large and offer a range of courses – both practical & academic. This is part of S331 of the Income & Corporation Tax Act 1988.
Now, if the provision of a scholarship is given to a child of a director or employee of a company (mainly in owner managed companies) and the employee earns over £8,500, then the scholarship becomes a benefit of the parent and therefore is assessed as such on the parent for tax. The scholarship rates do have limits applied that were set from 1st September 2007. The tax free element is no more than £15,480 per year, or £1,290 per month or £297.92 per week.
Prize money is another area that seems to be a bit grey around the edges. We are talking here of prizes gained from competition and not gambling prizes as they are very different. Awards from entering a completion which relates to the course of your self-employment are taxable provided you have entered them. You take the risk & reward form them, as the costs of the competition will be an allowable expense. Only prizes awarded as a mark of public esteem will be tax-exempt.
Literary awards are a little odd and the taxable nature of them all depends on whether you entered the award with the intention of earning money as part of the professional activity or if somebody else entered you without permission. If entered without your knowledge, it is considered unsolicited and therefore any prize money does not attract tax. Think of the Booker Prize when it is publishers that put forward entries.
Just as an aside, if you apply for a grant from a charitable body such as The Arts Council England, the grant does attract income tax (it is VAT free income though).
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