CTM41260 - Particular bodies: trade unions: provident benefits: extent of relief

ICTA88/S467

A registered trade union is exempt from tax on:

• non-trading income,

and

• chargeable gains,

which are used for provident benefits where the union is not allowed by law or its own rules from assuring to any persons amounts over certain limits. Note that trading income is not exempt.

The maximum limits are:

The relief allowed depends upon the type of fund from which the benefits are paid, either hypothecated or general.

Hypothecated fund

This is a separate fund the union can set up. If all the income and gains have been irrevocably earmarked by a rule of the trade union for the payment of provident benefits, you should regard them as applicable and applied to provident benefits. You should grant the exemption accordingly. This is subject to the proviso that, if it appears that a union has built up reserves of tax-relieved income earmarked for provident benefits which seem much larger than are likely to be necessary to pay provident benefits, you should refer the case to HMRC Charities (Charity Title) before granting the exemption.

If provident benefits are paid when the accumulated income and gains of the fund have already been used they can be set against the income and gains of the union's general funds for the same accounting period. It is not likely that this will happen often. However, you cannot allow the carry forward of any excess benefits.

General funds

If there is no hypothecated fund, only the income and gains that are actually used to pay provident benefits are exempt. Allow relief according to the income/gains and the expenditure on provident benefits in that particular accounting period. Do not carry forward any excess used to pay provident benefits over income or gains, or set it against income or gains from an earlier accounting period.

Refer any problems to HMRC Charities (Charity Title).

ICTA88/S467 (4) includes the following as registered trade unions:

• the Police Federation for England and Wales,
• the Police Federation for Scotland,
• the Police Federation for Northern Ireland,
• any similar police organisation.