Generally, volunteering is described as an unpaid activity where someone gives their time to help a not-for-profit organisation or an individual who they are not related to. It should not be treated in the same way as work undertaken by employees, otherwise legal areas such the minimum pay legislation will apply. In a number of recent claims, voluntary workers won the right to be considered as employees and brought a claim against their employers for both discrimination and unfair dismissal. So care is needed that you do have appropriate management of volunteers.
Most voluntary organisations will pay expenses to volunteers. This is not generally taxable. You can reimburse the actual cost of expenses incurred by the volunteer and should ask for vouchers or receipts. If you have a number of volunteers, then it is wise to set up a system for them to make claims for expenses. To keep their claims quite separate from staff, have a separate form and ensure that this is properly authorised. This can cover trustees or management committee members as well.
You should also have a policy setting out what can be claimed. For example, the following items are acceptable:
- Travel to and from the place of volunteering
- Travel undertaken in the course of volunteering
- Meals taken during the course of volunteering (usually a single meal up to a certain value per day)
- Postage and telephone costs if working from home
- Protective clothing or other essential equipment
- Childcare expenses
- Loss of earnings allowances where the volunteer works in another organisation and produces proof of actual loss
Problems arise if round-sum allowances are paid. This may be simpler and seem fairer, but this is potentially seen as payment for work and becomes taxable. If you want to pay round-sum allowances then it would be wise to seek agreement from your local tax office. This would be given if you were able to show that you had a proper system of control in place over such payments, and that the amounts were reasonable in relation to the actual costs incurred.
If you do not have such an agreement and have paid round-sum allowances or other expenses without proper evidence such as receipts, then you will have to declare the payments on form P9 at the end of the tax year. This has to be sent to the tax office with the other PAYE forms. The volunteer would have to claim tax relief on the expense payments they have received from you through their tax return, demonstrating that the amounts were spent fully in carrying out their duties. This is obviously onerous and can lead to unexpected tax liabilities, so it is obviously much better to make suitable arrangements in advance.
