Income Tax (Earnings and Pensions) Act 2003 section 299A

Voluntary office-holders: compensation for lost employment income

Section 299A provides an income tax exemption for payments made by certain public bodies and other organisations to voluntary office-holders, where those payments compensate the individual for employment income lost while carrying out the duties of the voluntary office.

• Compensation payments made to voluntary office-holders for lost employment income are exempt from income tax, provided the payment does not exceed the net income actually lost.
• A voluntary office is one where the holder is not entitled to, has not received, and does not expect to receive any payment or benefit for carrying out the duties — though reimbursement of reasonable expenses is disregarded.
• Lost employment income is calculated as the difference in net pay (after tax and national insurance) between what the person would have earned and what they actually earned during the period they were carrying out office duties.
• The exemption applies only where the payment is made by a "relevant authority", which includes government departments, local councils, trade unions, Local Medical Committees, and other statutory public bodies, as well as not-for-profit companies carrying out those bodies' functions.