The effect of this section is to change the tax law that has existed for a long period. The income arising from a scholarship which is paid to a person receiving full-time education at a university, college or school has been exempt up to now. This section would change that. Why was it necessary to make this change?
SECTION 9.
Question proposed: "That section 9 stand part of the Bill."
This is a monument to the extraordinary ingenuity and lateral thinking known to exist among accountants.
They are nearly as good as architects.
Our mistakes tend to get built——
And fall down.
——while accountants' tend to get buried. This was a clever device where, following the closing of back-to-back covenants on education fees, the existing legislation regarding scholarships, which goes back a long way, was creatively interpreted so that directors of a company were able to establish new scholarship schemes of which the sole beneficiaries were their own children. We have closed that loophole, but we have not wanted to damage the existing scholarship system and exemption from income tax. We have also allowed a time frame to account for the commitments people have entered into. The section states that the section applies immediately to scholarships awarded on or after 26 March 1997, and as a traditional measure to existing scholarships with effect from 6 April 1998. Those who have gone through the system as the law stood will retain that benefit until the end of the current tax year. If they are not compliant with the terms of this section after 1998, they will not continue to qualify.
I agree with the Minister. I have some indirect knowledge of the way this worked and it was possible to set up a bona fide scheme but the target audience for the scholarship could have been termed very limited.
Question put and agreed to.