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HMRC internal manual

PAYE Manual

PAYE operation: specific employments: part time public appointments

Payments for travel and subsistence

As part of the terms of a part time appointment, government departments and public bodies often pay

  • The expense of travel between the office holder’s home and the usual place where duties are performed
  • A subsistence allowance for periods spent there

Special arrangement

Office holders are often invited to enter into an agreement whereby the payer accounts for tax on payments towards travel and subsistence. These expenses payments are then

  • Not treated as pay for tax deduction purposes
  • Not included on the Deductions Working Sheet of the individual
  • Not included by the individual as expenses payments on tax returns

So the tax deducted under these arrangements cannot be repaid.

The government department or public body that makes the payments, invites the office holder to agree to the special arrangement by

  • Writing a letter of invitation to the office holder (see below)
  • Sending it with a blank letter of agreement (see below)

The office holder agrees the arrangements by completing the letter of agreement and returning it to the payer.

It is then sent by the payer to the Demand Led Customer Coordinator Team in Bristol (NHS, Government Departments and Police Authorities only).

A copy of the signed letter should be filed in the Demand Led Customer Coordinator file.

If an agreement is given in a different form, refer it to the Demand Led Customer Coordinator Team in Bristol (NHS, Government Departments and Police).

Accounting arrangements

The accounting arrangements for these special arrangements are made centrally by the Demand Led Customer Coordinator Team in Bristol.  The tax is at a composite rate calculated from a review of a sample of office holders.  KAI will ask for information about selected office holders.

Office holder does not agree or revokes the arrangement

Where agreement is not given, PAYE will be operated on taxable payments of travelling and subsistence expenses.

The Demand Led Customer Coordinator Team in Bristol will advise on the arrangements to be adopted if an agreement is revoked.

Travel and subsistence payments - special arrangement letter of invitation

Description of part-time office:

Payments of travelling and subsistence expenses: Income Tax

1. Payments we make to you for travelling to and from the place where you normally carry out the duties of your office and for staying there, are taxable
2. Our intention is that the amount you receive for travelling, subsistence and so on in these circumstances should be equivalent to the amount you actually spend. So we have entered into special arrangements with HM Revenue & Customs (HMRC) which mean we can effectively pay the tax on your behalf. We do this by paying tax to HMRC at a special rate.
3. If you wish to participate in these arrangements you will need to sign an agreement with HMRC. The agreement would be that the travelling, subsistence and other expenses paid to you which come within its scope would not form part of your income for tax purposes. This would mean that:
  * You would have no tax to pay on these expenses
  * You would not be able to reclaim the tax we have paid on your behalf
4. The terms of this agreement are set out in the attached letter. If you decide to accept them please complete the letter and return it to our address printed above. We will then send it on to HMRC on you behalf.
5. If you do not wish to enter into this agreement with HMRC, we shall operate PAYE on these expenses in the same way as we operate PAYE on the fees paid to you.

Travel and subsistence payments - agreement to special arrangement

Letter of agreement.

Demand Led Customer Coordinator Team
NE98 1ZZ

I am writing to let you know that:

a. I wish to have the tax due on travelling and subsistence expenses I receive together with any further liability arising as a consequence of entering this agreement paid by [enter name of payer]
b. I understand that I will not be entitled to receive repayment of the tax paid on my behalf in any circumstances
c. I will write to let you know if I wish to withdraw from this agreement. I understand that in those circumstances the agreement will cease from 6 April following your letter to me confirming your agreement to my withdrawal

Name (in block capitals):
National Insurance number: