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HMRC internal manual

Employment Income Manual

Employment income: financial loss allowances

Section 62 ITEPA 2003 and section 299A ITEPA 2003

Financial loss allowance (FLA), sometimes called a payment for loss of earnings, is paid to individuals who hold a voluntary office with a public body such as a county, district or parish council.

For periods up to 5 April 2018, HMRC allowed by extra-statutory concession that no income tax would be due on such a payment provided it was calculated to do no more than replace the salary the recipient would otherwise have received from their employer.

From 6 April 2018, the Enactment of Extra-Statutory Concessions Order 2018 (S.I. 2018/282) enacted this extra-statutory concession by introducing section 299A of ITEPA. Section 299A provides an exemption from income tax on payments of FLA if specified conditions are met. For more information about section 299A, see EIM01125.

FLA is also paid to individuals carrying out voluntary public services other than as the holder of an office, such as jurors. As these individuals are not office-holders, any payments they receive would ordinarily be taxable as miscellaneous income rather than employment income. The extra-statutory concession above also applied to FLA payments to such individuals and, from 6 April 2018, section 782C of ITTOIA 2005 was introduced to enact this part of the concession. You can find more information, and details of the position where the recipient of FLA is self-employed rather than employed, in the Business Income Manual at BIM40475.