Income Tax (Trading and Other Income) Act 2005 section 782C

Volunteers etc: compensation for lost employment income

Section 782C provides an income tax exemption for payments made by a relevant authority to compensate volunteers and others (including jurors) for employment income they have lost as a result of performing unpaid services for that authority.

• Payments made by a relevant authority to compensate a person for lost employment income while performing unpaid voluntary services (including jury service) are exempt from income tax, provided the person is not acting as the holder of a formal office with that authority.
• The exemption only applies where the person receives no financial benefit from the services — meaning they are not entitled to, have not received, and do not expect any payment or benefit in connection with them, other than reimbursement of reasonable expenses, compensation for lost social security income, or the exempt compensation payment itself.
• Lost employment income is calculated as the difference between the net employment income (after tax and national insurance) the person would have received had they not performed the services and the net employment income they actually received for the same period; the compensation payment must not exceed this amount.
• This exemption mirrors the conditions in section 299A of ITEPA 2003, which applies where the person performs services as the holder of a voluntary office with the authority; section 782C covers the situation where the person does not hold such an office.