3.41.1 Voluntary workers sometimes incur expenditure when assisting charities to carry out their work (for example, travel costs, postal or photocopying charges). Provided the expenses are reasonable and proper, a charity can reimburse a volunteer for the expenses incurred. Often a volunteer will forgo the expenses to which their entitled. This section explains how the Gift Aid rules apply when volunteers agree to forgo their expenses. 3.41.2 One of the requirements of the Gift Aid Scheme is that the gift by a donor to a charity ‘takes the form of a payment of a sum of money’. So a Gift Aid payment to a charity cannot be made by book entries following a waiver of expenses. 3.41.3 The charity must physically pay the expenses to the volunteer. The volunteer is then free to keep the money or pay part or all of it back to the charity as a Gift Aid payment. If they give all of the expenses paid back to the charity, they’re not returning the expenses but making a payment of an equivalent amount. 3.41.4 The charity will need, as normal, a Gift Aid declaration and an audit trail to bring the payment into the Gift Aid Scheme. The payment will also need to meet the usual requirements of the Gift Aid Scheme (benefit rules). 3.41.5 For audit purposes, it is preferable that at least one of the payments by the charity or the volunteer is made by cheque. Taxation implications for the volunteer 3.41.6 Before a payment made to volunteer worker can be charged to tax as employment income there must be:
either an office or an employment
earnings from that office or employment
3.41.7 A person who does voluntary unpaid work for a charity will not normally be engaged under a contract of employment and will not, normally, be the holder of an office. If there’s no office or employment, it follows that the reimbursement of any expenses incurred by voluntary workers in doing the work of the charity 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. 3.41.8 If expenses are paid which do more than reimburse the costs incurred, or are at scale rates 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 taxable as employment income if it can be shown that they hold an office or employment. If they do not hold an office or employment, the payments may be chargeable as a miscellaneous receipt. 3.41.9 If there’s doubt about the tax treatment of expenses payments to volunteers, the HMRC office responsible for considering the matter is:
for payments made to volunteers who have a contract of employment or are holders of an office, the HMRC office that’s responsible for operating the PAYE Scheme for the charity
otherwise, the HMRC office responsible for the volunteer’s own tax affairs
Approved mileage allowances 3.41.10 Expenses payments to volunteers within the rates of the approved mileage allowance payments scheme as published by HMRC will not be taxable.