HMRC Not Minded To Grant Counsellor Tax Refund

February 22, 20230

A counsellor requested repayment of income tax and NIC while he attended a wellbeing practitioner course, but HMRC did not agree as the course was not full time and he did not receive a bursary.

HMRC took a few years to come to a conclusion, but eventually it decided that a counsellor was not eligible for a refund of income tax because he received a salary, not a bursary, while attending a postgraduate course.

Between April 2012 and March 2013, Edward Phelan attended a postgraduate course, the Psychological Wellbeing Practitioner Programme, run by the University of Essex.

Phelan attended the university one day a week, and the other days he provided one-to-one counselling sessions as a psychological wellbeing practitioner to patients within GP surgeries as an employee of Basildon Mind, a charity and limited company.

In 2012/13, Phelan received a gross salary for tax purposes of £18,642, from which tax of £2,024 and national insurance contributions (NIC) of £1,324.80 was deducted.

Overpayment relief denied

In March 2017, Phelan wrote to HMRC to request a repayment of the income tax and NIC deducted from his pay during the period he had attended the course. He argued that the money he had been paid was a bursary and so exempt from tax under section 776 ITTOIA 2005 and from NIC under Sch 3, Part VII, para 12 of the NIC Regulations 2001.

In June 2019, HMRC determined that Phelan had not made an in-time claim for an income tax repayment and that in any event, such a claim would have been refused. In July 2020, HMRC issued its decision to refuse an NIC repayment. Phelan appealed to the first tier tribunal (FTT) [TC08688].

NIC decision

The FTT determined that Phelan was not eligible for an NIC exemption for several reasons. Firstly the course Phelan undertook was not “full time” per the NIC regulations, as he attended the university one day a week and worked for Basildon Mind as a therapist on the other days. Although the FTT accepted that during those therapy sessions Phelan would put into practice what he had learned on the course, it did not follow that the course itself was full time.

The course also did not run for a full “academic year” as required by para 12(2), noting that an academic year is defined under para 12(9) as “the period beginning on 1st September of one calendar year and ending on 31st August of the following calendar year” (the course ran from April to the following March).

Finally, Phelan also failed the maximum payments threshold provided for in para 12(6), having received more than £15,480 in payments.

Income-tax decision

Phelan argued that the letter he wrote to HMRC in March 2017 was a valid claim for overpayment relief. However, the FTT agreed with HMRC that the letter did not meet the statutory requirements to make such a claim. As the four-year time limit to make an overpayment relief claim for 2012/13 had expired on 5 April 2017, Phelan was out of time.

In any event, the FTT found that even if the claim had been made appropriately and in time, it still would have failed.

This is because Phelan was outside the scope of section 776 ITTOIA 2005: he was not in full-time education and did not receive a bursary – his contract repeatedly described the money he was paid as a salary, and this was also reflected in his payslips.

Alternative argument

Phelan advanced an alternative argument that his pay was not taxable or subject to NICs because the course had been a widening access training scheme (WATS) course, and so fell within a concession.

The concession – which was withdrawn for courses that started on or after 1 September 2019 – was to provide refunds for NHS Trust workers.

As the concession previously stood, if someone had received payments from their NHS employer while attending a WATS course, they “might be entitled to a refund of the income tax and national insurance contributions paid”. For courses that were attended prior to 6 April 2013, the individual’s NHS Trust would submit a claim to HMRC on their behalf.

Since the concession was withdrawn, HMRC guidance states that income tax and NIC are due on payments made to NHS employees attending these courses, on the basis that such payments are of salary and are not scholarship income. HMRC’s position is that it will not seek to recover refunds previously made when the concession was in place.

The FTT acknowledged that it did not have the jurisdiction to decide disputes over concessions, citing BT Pensions Scheme vs HMRC [2015] EWCA Civ 713. It did go on to state that, even if that jurisdiction were in place, the FTT agreed that Phelan was not within the concession’s scope: the WATS concession was limited to NHS employees, and Phelan was not an NHS employee when he worked for Basildon Mind.


HMRC took a rather long time to respond to Phelan’s initial letter in March 2017, finally concluding matters some years later. HMRC did pay Phelan a consolatory amount of £150 due to the time taken to resolve his case.

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