Financial loss allowances, sometimes known as payment for loss
of earnings, are paid to members of various public bodies for loss
of remunerative time and, in some cases, for additional expenses,
incurred while engaged on the duties of those bodies.
Where the recipient is self-employed, the amounts received
are made for the purpose of filling a hole in the profits of the
trade, profession or vocation and are taxable receipts of the
business. This follows the principles set out in London &
Thames Haven Oil Wharves Ltd v Attwooll [1966] (43TC491).
Payments that do not fill ’a hole in the profits’
of the trade, profession or vocation and are not taxable receipts
of the business.
For example a day subsistence allowance may be received. This
is not a payment to make up for the loss of profits, nor does it
cover additional expenses of the business. It covers additional
personal expenses. It will not be a taxable receipt of the
business.
Examples of people who may receive financial loss allowances
include:
