SE65910 - Tax treatment of Local Government Councillors and Civic Dignitaries: allowances Councillors may receive - 1990/91 and earlier years

Details of allowances paid to councillors in years up to and including 1990/91 and their treatment for tax purposes are given below. As regards 1991/92 onwards, see SE65920.

a. Attendance allowance

The following individuals are entitled to receive attendance allowances for the performance of an “approved duty”, for example attendance at council meetings.

i) Councillors on district councils in the metropolitan areas of England and county and district councils in non-metropolitan areas of England and Wales provided they do not elect to receive financial loss allowance instead (see b. below)

ii) Councillors on district councils in Northern Ireland, whether or not the councillor has the honorary title of alderman, mayor etc.

iii) Councillors on a London Borough council (or on the Greater London council until its abolition in 1985/86) provided they do not elect to receive financial loss allowances instead (see b. below).

iv) In Scotland, councillors on the councils of regions, districts and “islands areas”.

An individual can be a member of more than one council and be entitled to attendance allowances for each office he or she holds. A parish councillor (in Wales and Scotland, a community councillor) is not entitled to attendance allowances unless he or she is acting in a representative capacity for the parish council outside the parish, for example at a particular meeting of the district council.

The maximum amount of attendance allowance payable to an individual for an approved duty lasting one day is determined by the Secretary of State for the Environment and councils are free to fix the daily rate for their councillors at or below the prescribed limit.

Attendance allowances are emoluments chargeable under Schedule E (see generally SE00510 onwards). The council paying them is obliged by the PAYE Regulations to operate PAYE

b. Financial loss allowance

Councillors and co-opted members can sometimes elect to receive financial loss allowance instead of attendance allowance. Financial loss allowance is not taxable under Schedule E but may be taxable under Schedule D in certain circumstances.

c. Special responsibility allowance (England and Wales only)

Councils are authorised to pay out a maximum amount in special responsibility allowances. Some councils pay small amounts to a number of officers and others pay larger sums to only a few. Those likely to receive payments tend to be holders of positions such as Chairman of sub-committees. These allowances are chargeable emoluments within Section 19(1)1 ICTA 1988 and PAYE should be operated. However, the receipt by a councillor of such an allowance does not affect the treatment of any financial loss allowance they may also receive (see b. above).

d. Allowances for travel and subsistence

A council is entitled to pay officers travel costs and a subsistence allowance to enable them to perform an approved duty either inside or outside the United Kingdom and to defray any expense incurred in the reception and entertainment of visitors to the council's area.

In the case of councillors, none of these allowances are taxable.

e. Allowances to council chairmen and vice-chairmen

In addition to the allowances payable under a.- d. above, councils may pay an allowance to meet the expenses of office of

i) the chairman and vice-chairman of county or district Councils

ii) the chairman, vice-chairman and deputy chairman of the Greater London council - until its abolition in 1985/86

iii) the mayors and deputy mayors of the London Borough councils

iv) the chairmen (but not the vice-chairman) of parish councils.

Although any such payment is within Schedule E, individuals within i)- iv) above should not be regarded as liable to tax in respect of the allowance where, as will usually be the case, it is wholly or substantially expended in connection with their duties. If an enquiry as to the amount expended is considered to be necessary, it should not be made until after the end of the relevant year of office. PAYE should not be applied to such expenses allowances.

Chairmen etc within i)- iv) above are, however, liable to tax on the attendance allowances received by them as councillors (see a. above), and on any special responsibility allowances (see c. above).