Policy paper

Income Tax and the treatment of expenses for voluntary office holders

Published 11 July 2019

Who is likely to be affected

Voluntary office holders who are paid or reimbursed reasonable private expenses incurred in carrying out the duties of the office.

General description of the measure

This measure replaces the existing concessionary treatment and creates a statutory Income Tax exemption for payments or reimbursements of reasonable private expenses made to voluntary office holders.

Policy objective

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 office holder. 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.

This measure ensures that reasonable out-of-pocket private expenses paid or reimbursed to voluntary office holders and which are linked to the duties of the office remain tax exempt. This recognises the role of voluntary office holders, 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. A Class 1 National Insurance contributions disregard will be introduced through regulations after Royal Assent to Finance Bill 2019-20.

Background to the measure

This measure was announced at Budget 2018.

Detailed proposal

Operative date

The measure will have effect from 6 April 2020.

Current law

Volunteers who are office holders are brought within the charge to tax on employment income by virtue of s5, Chapter 1 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003 . Where they are paid or reimbursed business expenses then s289A provides an exemption from liability to Income Tax. However, this only covers business expenses and would not include the reimbursement of private expenses such as travel from home to the place where they volunteer.

Paragraph 8 of Part 8 of Schedule 3 of Social Security (Contributions) Regulations 2001 (S.I. 2001/1004) provides a National Insurance contributions disregard for business expenses that are paid or reimbursed to an employee or office holder.

Proposed revisions

Legislation in Finance Bill 2019-20 will introduce a new section into Chapter 8 of Part 4 of the Income Tax (Earnings and Pensions) Act 2003 to sit alongside the existing provision (s299A) relating to voluntary office holders.

The new legislation defines that no liability to Income Tax arises in respect of a payment to a person who holds a voluntary office if the payment is in respect of reasonable expenses incurred in carrying out the duties of that office.

Summary of impacts

Exchequer impact (£m)

2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023
-	Negligible	Negligible	Negligible	Negligible	Negligible

This measure is expected to have a negligible impact on the Exchequer.

Economic impact

This measure is not expected to have any significant economic impacts.

Impact on individuals, households and families

Voluntary office holders who receive payment of reasonable expenses arising from their voluntary duties will continue to benefit from the exemption that is now on a statutory footing.

The total number of voluntary office holders is unknown. However, there are 11,500 special constables and 21,500 magistrates in the UK. There are also office holders in other parts of the voluntary sector, for example there are 168,000 registered charities and 7,000 Community Amateur Sports Clubs. There are also individuals who hold a volunteer position in a political party, but the number is unknown.

The measure is not expected to have any impact on family formation, stability or breakdown.

Equalities impacts

It is not anticipated that there will be impacts on groups with protected characteristics.

Impact on business including civil society organisations

This measure will have no impact on businesses or civil society organisations. It only affects individuals who are voluntary office holders.

Operational impact (£m) (HMRC or other)

There are no operational impacts.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

This measure will be kept under review through regular communication with affected taxpayer groups.

Further advice

If you have any questions about this change, contact the Employment Income Team by email: employmentincome.policy@hmrc.gov.uk.