Voluntary office-holders: payments in respect of expenses
11 July 2019
The 2019-20 Finance Bill introduces a new income tax exemption for voluntary officeholders who are paid or reimbursed reasonable private expenses incurred in carrying out the duties of the office.
The new provision (originally announced at Budget 2018) places the existing concessionary treatment for payments or reimbursements of reasonable private expenses made to voluntary officeholders on a statutory basis and will have effect from 6 April 2020.
Most individuals who do unpaid voluntary work for an organisation, such as a charity or local society, are not office holders or employees. This means the reimbursement of any expenses incurred by these individuals in doing the work of the organisation will not give rise to a liability to tax. Similarly, these individuals are not liable to tax on the reimbursement of the extra cost they might incur, such as the travel between home and the place the work is done.
However, a person who has been appointed to a position by an organisation and does voluntary unpaid work for that organisation may be an officeholder. Voluntary office holders include, for example, magistrates and special constables.
HMRC’s long-standing practice is that no tax charge arises on expenses provided to voluntary office holders, as long as they do not receive any reward for carrying out the duties of their office and any payments or reimbursements do no more than meet the expenses they incurred. This means voluntary office holders are in a similar position to volunteers in the treatment of their private expenses paid or reimbursed by the organisation. However, this treatment is concessionary and the measure creates a statutory tax exemption.
From 6 April 2020
The new measure ‘Income Tax and the treatment of expenses for voluntary officeholders’ ensures that reasonable out-of-pocket private expenses paid or reimbursed to voluntary officeholders and which are linked to the duties of the office remain tax-exempt. This recognises the role of voluntary officeholders, ensures that the tax treatment of their private expenses continues to be comparable to those of volunteers, and provides certainty by placing the treatment on a statutory footing.
The payments will also not be subject to National Insurance contributions (NICs). A Class 1 NICs disregard will be introduced through regulations after Royal Assent to Finance Bill 2019-20.