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Where Taxpayers and Advisers Meet

Income Taxed on a Stipend Payment

ButterCracks
Posts:5
Joined:Fri Apr 28, 2023 7:11 pm
Income Taxed on a Stipend Payment

Postby ButterCracks » Fri Apr 28, 2023 7:29 pm

So I got a nasty surprise in my salary payment today.

I work for a company that very generously offer Stipends towards IVF treatments.
The total cap is £28,000 with a maximum of £7,850 per cycle.
Since I work for a global company, the policy wording is universal in that it is ‘subject to regional statutory tax and social security deductions’.
Under U.K. legislation Stipends are not taxable. This has been confirmed to me by HMRC.

I underwent treatment and submitted my receipt of £6,700 for my first IVF cycle. I was told this will be with me in this months payroll.
I usually pay £2,060 total in tax and NI payments every month.

This month, in addition to my usual salary they deposited ‘£7,850’ for the stipend payment (note the cycle cost was £6,700)

My total deductions including tax and NI were £5,668! (Usual deductions are £2,060)

I have taken this up with HR who tell me that the Stipend is taxable and perhaps the wording on the policy might need to be re-phrased. That they have spoken to tax advisors and this contribution is indeed taxable.
We have literally been going round in circles on this.

Does anyone have advice on this? I work a full time job, but this contribution is indeed termed a Stipend payment in the policy and Stipends (to my understanding) are not taxable in the U.K. Or are there caveats to this?

Furthermore I have already been subject to PAYE tax on the money I used to initially pay for this treatment. I have now been PAYE taxed again.

Finally this contribution to reimburse a medical treatment is not an income in form of a salary or a bonus. It is reimbursement of medical treatment.

It also doesn’t help that this is the first cycle of 4, and just happens to have landed in my payslip at the start of the financial year!

What can I do? Does anybody have advice or able to help?

darthblingbling
Posts:711
Joined:Wed Aug 02, 2017 9:09 pm

Re: Income Taxed on a Stipend Payment

Postby darthblingbling » Sat Apr 29, 2023 12:26 pm

Where in legislation does it say specifically that stipends are tax free? Stipend has a fairly wide meaning and to consider the tax position of the payment you'd have to look to more than just its label.

This appears to either be a reimbursement of medical expenses or round sum allowance towards medical expenses paid purely by reason of your employment, I can't see how it's not taxable as earnings as I'm not aware of any specific exemption for IVF treatments?

billypiper
Posts:114
Joined:Wed Aug 06, 2008 4:10 pm

Re: Income Taxed on a Stipend Payment

Postby billypiper » Sat Apr 29, 2023 1:41 pm

Yes they are taxable

You have been hit by tax at 40% so hopefully no more surprises

Dennis

taxesclear 07802704840

bd6759
Posts:4298
Joined:Sat Feb 01, 2014 3:26 pm

Re: Income Taxed on a Stipend Payment

Postby bd6759 » Sat Apr 29, 2023 1:50 pm

A dictionary definition.
sti·pend
[ˈstʌɪpɛnd]
NOUN
a fixed regular sum paid as a salary or as expenses to a clergyman, teacher, or public official
A “stipend” is not, as far as I can see, mentioned in UK tax law. But that definition falls squarely within the meaning of taxable income:

(2)In those Parts “earnings”, in relation to an employment, means—
(a)any salary, wages or fee,
(b)any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money’s worth, or
(c)anything else that constitutes an emolument of the employment.
Medical expenses are not tax deductible in the UK.

ButterCracks
Posts:5
Joined:Fri Apr 28, 2023 7:11 pm

Re: Income Taxed on a Stipend Payment

Postby ButterCracks » Sat Apr 29, 2023 10:29 pm

Thanks all for the feedback on this. I rang HMRC and they confirmed to me that stipends are not taxable but I didn’t provide context to what it was for.

It’s unfortunate that the first of 3 cycles had inconveniently landed in the first payslip of the financial year. Bad planning on my part but I didn’t think about this because I didn’t realise it was taxable. I assumed that I would be reimbursed the exact amount I’d paid so long as it’s within the £7,850 limit as mentioned in the policy.

The policy states the company will contribute a maximum of £7,850 per cycle.

So assuming this is going to continue for the next two cycles, my salary is £80k and I get paid a £10k bonus each year. Have I messed up in that I’ll be paying the higher income tax this year?

AGoodman
Posts:1767
Joined:Fri May 16, 2014 3:47 pm

Re: Income Taxed on a Stipend Payment

Postby AGoodman » Tue May 02, 2023 4:24 pm

Were these payments definitely direct payments from your employer rather than payments from a (generous) group health insurance scheme?

ButterCracks
Posts:5
Joined:Fri Apr 28, 2023 7:11 pm

Re: Income Taxed on a Stipend Payment

Postby ButterCracks » Wed May 03, 2023 9:09 pm

Were these payments definitely direct payments from your employer rather than payments from a (generous) group health insurance scheme?
Yes they were directly from my employer titled ‘Special Payment’.

ButterCracks
Posts:5
Joined:Fri Apr 28, 2023 7:11 pm

Re: Income Taxed on a Stipend Payment

Postby ButterCracks » Wed May 03, 2023 9:11 pm

A dictionary definition.
sti·pend
[ˈstʌɪpɛnd]
NOUN
a fixed regular sum paid as a salary or as expenses to a clergyman, teacher, or public official
A “stipend” is not, as far as I can see, mentioned in UK tax law. But that definition falls squarely within the meaning of taxable income:

(2)In those Parts “earnings”, in relation to an employment, means—
(a)any salary, wages or fee,
(b)any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money’s worth, or
(c)anything else that constitutes an emolument of the employment.
Medical expenses are not tax deductible in the UK.

Exactly my point that this is a medical expense for which the money I used to pay for treatment was PAYE taxed and then when reimbursed PAYE taxed again. It just doesn’t make sense to me. Do I have a case here?

darthblingbling
Posts:711
Joined:Wed Aug 02, 2017 9:09 pm

Re: Income Taxed on a Stipend Payment

Postby darthblingbling » Wed May 03, 2023 10:41 pm

From a tax perspective, no.

From a legal perspective, maybe. They've admitted the agreement was poorly written so there may have been a genuine expectation to receive a net payment of X amount from your employer and you're now out of pocket as a result of that. I'm not a legal expert but I've seen it a few times in tribunal cases against an employer.

bd6759
Posts:4298
Joined:Sat Feb 01, 2014 3:26 pm

Re: Income Taxed on a Stipend Payment

Postby bd6759 » Wed May 03, 2023 10:55 pm

It just doesn’t make sense to me. Do I have a case here?
Everything you buy is out of income that has been taxed. Your car, food, clothes. Elective medical treatment is no different. That is not a burden that should fall on the other taxpayers.


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