SE71100 –Voluntary organisations: tax treatment of voluntary workers - tax treatment of unpaid office holders - employees of voluntary organisations

Voluntary workers

Before tax can be charged under Schedule E there must be

• either an office or an employment
• and an emolument from that office or employment.

A person who does voluntary unpaid work for a voluntary organisation, for example, a charity or local society, will not normally be engaged under a contract of employment and will not normally be the holder of an office. If there is no office or employment, it follows that the reimbursement of any expenses incurred by voluntary workers in doing the work of the organisation will not give rise to liability to tax. Similarly, voluntary workers who are otherwise unpaid are not liable to tax on the reimbursement of the extra cost they might incur because they undertake such work, for example, the expenses of travel between home and the place where the work is done.

If expenses are paid which do more than reimburse the costs incurred, or are at scale rates (see SE05200) which cannot reasonably be regarded as merely a reimbursement of what they spend, the voluntary workers may be receiving remuneration for their services. In that case, the payments will be chargeable under Schedule E if it can be shown that they hold an office or employment. If they do not hold an office or employment, liability might arise under Case VI of Schedule D.

Unpaid office holders

The same principles apply in relation to

• officials elected under the constitution of bodies such as sports clubs and social clubs and
• people who undertake unpaid work within normal commercial organisations, or within areas such as the health service, governing bodies of Further Education Colleges, or the courts.

Such people may well hold an office. But the office will not be within Schedule E unless it can be shown that the office holders are being remunerated for their services. If the sums involved are small, districts should not spend time examining the amounts paid to such officials to compensate them for the extra expenses they incur as a result of holding office.

If such an unpaid worker receives a financial loss allowance (see SE01120) that allowance will not cause an otherwise non taxable reimbursed expense to become taxable.

Employees of voluntary organisations

The above comments do not apply to ordinary employees of voluntary organisations who are engaged under contracts of employment. Payments to such employees will be chargeable to tax in accordance with normal principles (see SE00510 onwards) and PAYE should be operated as necessary.