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HMRC internal manual

Company Taxation Manual

Particular bodies: Trade unions and eligible employers’ associations: Provident benefits - nature of payment

CTA10/S982 (2)

Provident benefits include any payment made to a member, or their representative, which is specifically authorised by the union’s or association’s rules, including a payment which is made

  • to a member for sickness or incapacity from personal injury or while out of work
  • to a member by way of superannuation by reason of age, sickness or incapacity from personal injury
  • to a member who has met with an accident
  • to a member who has lost of tools by fire or theft,
  • to cover funeral expenses of a member or their husband, wife or civil partner, or
  • to provide for the children of a deceased member.

The administration costs involved in providing these are also allowable as provident benefits.  Work them out as a portion of the costs in the union’s or association’s accounts.

If a union’s or association’s rules allow it to take out a group insurance policy to cover payments of provident benefits to members the premiums paid are also allowed as provident benefits.  However there is no relief for the actual payments made by the insurance company.

If the union’s or association’s rules allow it to pay for:

  • certain legal expenses,
  • compensation for accident or injury, or
  • representing members at industrial tribunals in unfair dismissal cases

these are also allowed as provident benefits.  If a trade union or association has its own legal section work out the amount yallowable by apportioning the charge in the accounts.  No other payments for legal expenses are allowable.  It does not matter whether the payments are made directly to the legal advisers rather than the member.  If the union or association rules guarantee a specific sum it must not exceed the limit given in CTA10/S981, which is covered in CTM41260. However, relief can be given for larger payments if the rules allow for payment at the union’s discretion.

IPTM6100 onwards deals with the taxation of benefits received from policies.