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HMRC internal manual

Employment Income Manual

Tax treatment of local government councillors and civic dignitaries: expenses deductions: notes for guidance

All councils

To ensure that local councillors’ expenses are, so far as possible, dealt with in a consistent manner, the Association of Local Councillors has prepared notes for guidance on expenses for circulation to its members. These notes are reproduced at EIM65955. Deductions for expenses under sections 336 to 338 ITEPA 2003 from local councillors should be dealt with in accordance with them. Where, however, offices dealing with local authorities have a separate agreement covering the treatment of certain expenses, for example, travelling expenses on non- approved duties, for all councillors, that treatment may be continued if the councillors wish.

Particular attention should be paid to the introduction to the notes, which sets out the circumstances in which no deduction for expenses can be given, for example, where expenses are incurred for political purposes.

For example, no deduction is due for subscriptions to a councillor’s party political association.  Membership of the association may be compulsory, but that is not enough to satisfy the conditions in section 336 (see EIM31630). Payment of the subscription merely puts the councillor in a position to perform his or her duties. It’s not paid in the performance of those duties.

The section of the note on travelling expenses reflects the rules on employee travel expenses that applied before 6 April 1998 when the notes were written. They don’t take into account:

  • travel for necessary attendance at a temporary workplace, see EIM32000
  • approved mileage allowance payments and mileage allowance relief (see EIM31200 onwards)
  • mileage allowance payments or passenger payments for travel between home and a permanent workplace that is treated as business travel (see EIM65941)

Those rules apply to councillors and civic dignitaries in the same way as they apply to other office holders and employees. Employment Income Technical attachments/payetechnical.htm will advise if any difficulties arise regarding the notes issued by the Association.

Councils in England

See also the guidance note issued to local authorities in England by the Office of the Deputy Prime Minister (see EIM65970).