01 November 2021

Sudeep Ganguli, employment taxes senior manager at PSTAX, discusses the payments made by public bodies to volunteers and the taxation consequences that could arise

Since the COVID-19 pandemic, there has been a significant increase in the number of public bodies making payments to volunteers. This has resulted in several queries being raised regarding the tax treatment of such payments.

Nothing has changed regarding the status of volunteers since the pandemic and, similarly, we are not aware of any changes regarding the taxation rules.

As many of you will be aware, Her Majesty’s Revenue and Customs (HMRC) clarified, during the pandemic, that employees returning to their normal places of work, even if volunteering on their days off – or carrying out other separate voluntary activity – were still liable to tax and National Insurance contribution (NIC) deductions through the payroll on any travel costs met, as they were not travelling in in the performance of the duties of their employment.


What is a ‘volunteer’ or ‘voluntary worker’?

If someone receives no payment or reward for their time, work done or services provided, they are likely to be a volunteer or voluntary worker.

So, if they receive no payments or benefits at all in connection with their voluntary work, the question of tax and NICs does not need to be considered by the engager.

Some volunteers will incur genuine reasonable expenses and be reimbursed for those. In such cases the expenses are not liable to tax or NICs, even if this includes travelling between home and the place where the voluntary work is undertaken.

This is on the basis that the expenses are reasonable and there is no profit element involved. For example, if the engager pays mileage that exceeds the authorised HMRC rate of 45p per mile, this would give rise to a profit element.

Therefore, it should be noted that if the expenses are not reasonable and include an element of profit, then they would potentially be liable to tax and NICs if HMRC considers the relationship is of a nature that makes it an employment or office holding.

Importantly, if the volunteer is in receipt of expenses that do not fully qualify for exemption from tax and NICs – or receives any other type of reward or recognition payment in respect of the voluntary role – all expenses and benefits paid will potentially be subject to a tax and NICs charge if HMRC considers there is an employment relationship or office holding (this point is considered further below). This would include the home to work travel expenses (even if they are within HMRC rates), because the person would no longer have volunteer status for tax and NICs purposes.

Other examples that could result in an individual losing volunteer status include:

the volunteer being given a voucher as a thank you for additional work undertaken or for their efforts, say, during the pandemic

the volunteer is given access to an employee assistance programme (EAP), or other corporate benefits usually reserved for paid employees.

It should be noted that, for tax and NICs to be due on the profit, there must be two elements:

  • the individual needs to hold an office or employment

  • there are payments or benefits for the work done that arise from the office or employment.

So, could the volunteers turn into employees or office holders simply by receiving a small reward? To establish whether there is an employment in place, the relationship between the individual volunteer and the paying organisation needs to be considered. If there is a contractual relationship in place under which the ‘volunteer’ works in the expectation of receiving payment or reward in return for doing that work, this will create an employment relationship.

If the volunteer works on a voluntary basis for no reward or payment, there may be no relationship in place which HMRC could challenge as an employment, although anything provided by way of reward could change the status fundamentally.

However, even if there is no employment relationship, please note that any income (profit or reward) a volunteer receives is still taxable in their hands and they are expected to disclose to HMRC this additional source of income under self-assessment.


Unpaid officeholders and expenses

Many clubs, societies and voluntary organisations depend on unpaid volunteers to act as a chair, treasurer, secretary etc. Generally, such roles continue and could be seen as ‘offices’ for the purposes of tax. However, they will not have any taxable earnings unless it can be demonstrated that they are being remunerated for the services provided. HMRC guidance states that its officers should not spend time examining small amounts of travel and subsistence payments, although this would not apply in the case of reward payments or expenses that clearly include a profit element.

An example of an unpaid officeholder is a special constable. HMRC has confirmed to PSTAX that if special constables receive bonus payments or other payments or benefits, they could lose their unpaid officeholder status. We have, however, been able to agree with HMRC in a specific case that a £20 voucher given to special constables during the COVID-19 pandemic was allowed, without it having an impact on their volunteer status. Please note this was in extremely specific circumstances and cannot be taken to be a blanket exemption.


National minimum wage (NMW) / national living wage (NLW)

The NMW/NLW legislation does not apply to volunteers if engaged by a charity, a voluntary organisation, an associated fund-raising body or a statutory body, but does apply if the volunteer receives any form of reward or payments above expenses actually incurred. Therefore, care should always be taken to ensure there are no breaches of the appropriate rules and advice should be taken in cases of uncertainty.



Volunteers are allowed to claim reasonable out-of-pocket expenses, even for home to work travel, without incurring a tax and NICs liability, but they are not permitted to receive payment for their time or work carried out. If they do receive a reward or are paid expenses that exceed the actual and reasonable costs incurred, they risk losing their volunteer status and, consequently, they could be liable to tax and NICs on all expenses received. Professional advice should always be taken in cases of doubt. 


Featured in the November 2021 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.