HMRC internal manual

Business Income Manual

BIM40475 - Specific receipts: grants and subsidies: loss of income whilst on public service

Financial loss allowances, sometimes known as payment for loss of earnings, are paid to members of various public bodies for loss of remunerative time and, in some cases, for additional expenses, incurred while engaged on the duties of those bodies.

Where the recipient is self-employed, the amounts received are made for the purpose of filling a hole in the profits of the trade, profession or vocation and are taxable receipts of the business. This follows the principles set out in London & Thames Haven Oil Wharves Ltd v Attwooll [1966] (43TC491).

Payments that do not fill ’a hole in the profits’ of the trade, profession or vocation are not taxable receipts of the business.

For example a day subsistence allowance may be received. This is not a payment to make up for the loss of profits, nor does it cover additional expenses of the business. It covers additional personal expenses. It will not be a taxable receipt of the business.

Examples of people who may receive financial loss allowances include:

  • Members of certain local authorities and similar bodies in Great Britain.
  • People serving as jurors in Great Britain.
  • Members of certain National Health Service bodies.
  • Magistrates or Justices of the Peace.