29 Jan Is Your Volunteer REALLY a Volunteer?
A number of clubs were penalised by the tax authorities last year for paying volunteers so called expenses because they were deemed to be a payment for services, i.e. the volunteer was in fact a worker.
This will happen if you pay volunteers for more than their actual out-of-pocket expenses and it is something HMRC will scrutinise if they decide to inspect your club or coaching business.
To add insult to injury, some clubs have also been prosecuted for not paying minimum wage to these volunteers, i.e. the amounts paid to the volunteer divided by the number of hours ‘worked’ did not meet the minimum hourly wage rate.
These volunteers will also have worker/employee rights which could cause serious problems to the organisation paying them if there are any disagreements or problems. Volunteers on benefits can also be affected if they are deemed to have been paid for more than their actually incurred expenses.
What Can You Pay?
You should only only reimburse actual out-of-pocket expenses to a volunteer, which means that the volunteer should submit a claim form with receipts to show what they have had to spend as a volunteer that they otherwise wouldn’t have.
Here are some examples of allowable expenses for a volunteer:
- Travel to and from the place of volunteering
- Travel while volunteering
- Meals taken while volunteering
- Accommodation for overnight stays
- Care of dependants required whilst volunteering, including children
- Postage, phone calls, stationery, etc. required for the organisation
- Cost of protective clothing/special equipment
- Cost of training required to carry out the duties
You shouldn’t pay flat rates for these types of expenses – they could be deemed a payment for services if HMRC can prove the volunteer has profited from the payment, i.e. the actual cost of the expense was less than the payment made.
HMRC will also scrutinise the level of expenses to ensure they are reasonable so it is advisable to set sensible limits on the amounts that can be spent on meals, accommodation, etc.
Mileage and Benefits in Kind
You do not need to get the volunteer to produce petrol receipts for travel when using their own car – they should submit a mileage claim form and can claim up to 45p per mile for a car, 24p per mile for motorbike and 20p per mile for cycling (as at 13 June 2014).
It should be noted that honorarium payments (‘thank you’ payments to committee members) are taxable and should be treated as such by the organisation paying the money.
Benefits such as free membership to a volunteer would be treated by HMRC as a payment for services, equating to the commercial value of the membership, and is therefore also taxable.
Payments for expenses can be made in advance so long as the necessary paperwork and reconciliation is carried out soon after the expenses have been incurred. An expense claim form should be completed, listing the expected expenses.
- Pay for out of pocket expenses only
- Only pay on receipt of a claim form
- Pay for car travel on receipt of a mileage claim form