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HMRC internal manual

Employment Income Manual

Financial loss allowances: voluntary office-holders with relevant authorities

Section 299A ITEPA 2003

As shown at EIM01120, for periods up to 5 April 2018 HMRC allowed payments of financial loss allowance (FLA) that compensated for loss of earnings to be exempt from income tax by extra-statutory concession.

From 6 April 2018, section 299A of ITEPA 2003 provides a statutory exemption from income tax on payments made to voluntary office-holders where those payments are made solely to compensate the person for lost employment income.

The exemption applies where:

  • a person holds a voluntary office with a relevant authority
  • they carry out duties of the office in a period in which they are also employed
  • the payment is made solely to compensate the person for lost employment income for the period (and accordingly does not exceed the amount of that lost income)

A person holds a voluntary office where, at the time that payment is made, they:

  • are not entitled to any payment or benefit in connection with carrying out the duties of the office
  • have not received any such payment or benefit
  • do not expect to receive any such payment or benefit

Payments of FLA themselves and payments in respect of reasonable expenses incurred in carrying out the duties of the office are disregarded when determining whether the person is entitled to receive, has received, or expects to receive, a payment or benefit in connection with carrying out the duties of the office.

A “relevant authority” is defined by subsection (5) of section 299A and includes:

  • government departments
  • local government (for example a county, district or parish council)
  • trade unions
  • local medical committees
  • any other body (other than a company under section 1 of the Companies Act 2006) that is established by or under a statutory provision for the purpose of carrying out functions conferred on it by or under a statutory provision

For more information on “lost employment income”, see EIM01130.