HMRC internal manual

Company Taxation Manual

CTM41260 - Particular bodies: Trade unions and eligible employers’ associations: Provident benefits - extent of relief


A registered trade union or eligible emplyers’ association (see CTM41290) is exempt from tax on:

  • non-trading income, and
  • chargeable gains,

which are used for provident benefits where the union or eligible employers’ association is prevented by law or its own rules from “assuring to” any persons amounts over certain limits. Note that trading income is not exempt.

The maximum limits are:

  Sum Assured Annuity
17 March 1987 to 31 March 1991 £3,000 £625
From 1 April 1991 £4,000 £825

The relief allowed depends upon the type of fund from which the benefits are paid, either hypothecated or general.

Hypothecated fund

This is a separate fund the union or association can set up. If all the income and gains have been irrevocably earmarked by a rule of the trade union or association for the payment of provident benefits, they may be regarded as “applicable and applied” to provident benefits and within exemption unless it appears that a union or association has built up reserves of tax-relieved income earmarked for provident benefits which seem out of proportion. Refer any such cases to HMRC Charities.

If provident benefits are paid when the accumulated income and gains of the fund have been exhausted for this purpose they may be set against the income and gains of the union’s or association’s general funds for the same accounting period, but excess benefits may not be carried forward.

General funds

If there is no hypothecated fund, only the income and gains that are actually applied to pay provident benefits are exempt. Apply income and gains to the expenditure on provident benefits in that particular accounting period for the purpose of calculating relief. Any excess used to pay provident benefits over income or gains may not be carried forward or back.

Refer any problems to HMRC Charities.

Police federations

CTA10/S983 includes the following as registered trade unions:

  • the Police Federation for England and Wales,
  • the Police Federation for Scotland,
  • the Police Federation for Northern Ireland,
  • any similar police organisation.