Factsheet number: 7.5



Last Updated: 22 July 2021

Introduction

Volunteering is a socially beneficial activity that is freely entered into and unpaid. However, although volunteers are not paid for the work they do, this doesn’t mean that they should be out of pocket after giving their time. You should therefore reimburse (pay back) their expenses e.g., travel costs and petrol. If you have any volunteers working with you, there are a number of legal and good practice issues that you should be aware of.

Contents

1. Introduction

1.1 Why pay volunteer expenses?

1.2 Which expenses should be repaid to volunteers?

2. Transport costs

2.1 Guidelines about transport type

2.2 Reimbursing mileage

3. Volunteer expenses: key issues

3.1 Volunteers in receipt of state benefits/ asylum seekers

3.2 Avoid giving volunteers income

3.3 Avoid creating a contractual relationship with your volunteers

4. Additional information

4.1 One off ‘thank you’ payments

4.2 Keeping records

1. Introduction

1.1 Why pay volunteer expenses?

Volunteers are making a gift of their time to you. This gift of time has substantial monetary value. Volunteers should not be expected to give up their own money as well as their time.

By reimbursing (paying back) your volunteers for their expenses, you are offering equal opportunities for all. If you don’t repay expenses, people on low income may not be able to afford to volunteer with you.

1.2 Which expenses should be repaid to volunteers?

In general, you should reimburse your volunteers for any reasonable expense incurred as part of the volunteering activity.

This may include:

  • travel to and from the place of volunteering
  • travel whilst volunteering
  • meals taken whilst volunteering (it is fine to set a limit on how much a volunteer may spend on a meal. In general, you should make sure they can spend enough to afford a hot meal and a drink in a local café).
  • postage, phone calls, stationery etc
  • cost of protective clothing/special equipment etc.

It is very important that you only reimburse ‘out of pocket’ (actual) expenses. This means reimbursing against receipts, bus, and train tickets etc. Under no circumstances should you pay a flat rate e.g., £5 per day to cover expenses as this can have legal and tax implications (see section 3. Volunteer expenses: key issues below).

You should ask your volunteers to keep all their receipts, bus, and train tickets etc so that they can use these to claim expenses (see section 5. keeping records).

2. Transport costs

2.1 Guidelines about transport type

It is OK to ask volunteers to come in by the cheapest reasonable form of public transport e.g., bus or train. However, you should appreciate that it may be necessary for some volunteers to take more expensive forms of transport e.g., taxis because of a disability. In light of this you should try to be flexible and budget for extra costs.

If your volunteer wishes to take a more expensive form of transport, you should ask them to agree this with you in advance.

2.2 Reimbursing mileage

HM Revenue and Customs (HMRC) has set a rate for the reimbursement of driving expenses. Mileage rates consider running costs of the volunteer’s car as well as fuel costs.

This is a convenient method of reimbursing transport costs because the volunteer does not need to keep receipts and proof of expenditure. Your volunteer just needs to keep a record of their mileage in the following way:        

You can give your volunteer a volunteer mileage record - employer template 7.5(a) to use for these purposes if you wish.

Mileage record - employer template 7.5(a)

HM Revenue and Customs approved maximum mileage rates are currently:

HMRC approved mileage rates

Vehicle type

Rate per mile

Cars and vans

45p (first 10,000 miles) then 25p for each subsequent mile

Motorcycles

24p

Bicycles

20p

 

These rates may be subject to change. Please keep up to date with them at

https://www.gov.uk/expenses-and-benefits-business-travel-mileage/rules-for-tax If volunteers would prefer not to be reimbursed at these rates, they can submit receipts for fuel and other driving costs and be reimbursed directly. This method involves more record-keeping over the tax year.

3. Volunteer expenses: key issues

When using volunteers, there are several key areas where you need to be careful to avoid getting into difficulty.

3.1 Volunteers in receipt of state benefits/ asylum seekers

Volunteers in receipt of state benefits are entitled to receive out of pocket expenses only. Claimants receiving more than out of pocket expenses may lose part of their means tested benefit.

Asylum seekers who volunteer are only allowed to receive out of pocket expenses. They must not be given something that would be regarded as income.

3.2 Avoid giving volunteers income

This could cause problems with HMRC

Any payments other than reimbursement of actual (out of pocket) expenses will be subject to tax and national insurance, as they will be regarded as income by HMRC. Simply referring to a payment made to a volunteer as ‘expenses’ does not necessarily make it exempt, nor does describing it as an honorarium, pocket money, sessional payment or any similar term.

If HMRC decides you are paying the volunteer an income (as opposed to simply expenses) you would have to put the volunteer through your payroll, as HMRC would treat them as employees for income tax and national insurance purposes in the same way they would your paid employees.

3.3 Avoid creating a contractual relationship with your volunteers

Or they may become employees

Expense’s payments that exceed volunteers’ actual expenses may be regarded as a payment in return for the work they have carried out e.g. income. This could be regarded as a contract giving the volunteer the same rights as your employees. This would include entitlement to:

  • the national minimum wage
  • holiday pay
  • employment rights e.g., under the Employment Rights Act 1996

An employment contract can arise when a payment is made in return for work, and there is an intention to create a legally binding relationship. Volunteering England says the following about this issue:

This payment [in excess of actual expenses] – known legally as consideration – does not have to be of much value, or even directly financial [e.g., it could be extra training]. Perks or benefits that could be seen to have value may be regarded as consideration. Around volunteering this could be, for example, training that is not necessary to carry out the volunteer’s role.

The intention is not necessarily something either party has expressed or even considered – it could be implied from the circumstances. One way of thinking about intent is to imagine the relationship from the point of view of an outside observer. If it looks and feels like a binding agreement has been made, then intent is likely to be inferred.’

From Mark Restall, Volunteers and the Law, Volunteering England (June 2005), p. 6 -7.

 

If a contract is created between you and your volunteers, it will be likely to change the legal status of the volunteers to employees giving them the rights outlined above.

In order to avoid creating an employment contract:

  • do not use any contractual language e.g., ‘contract’, ‘job’, ‘payment’, ‘requirements’ or ‘obligations’. Instead use language such as ‘agreement’, ‘role’, ‘reimbursement of expenses’, ‘expectations’ and ‘intentions’.
  • do not provide training that is not necessary to enable them to carry out the role.
  • avoid attaching ‘perks’ to the role.
  • only reimburse actual expenses. This way you will not be giving the volunteer an income.
  • reduce commitments on behalf of your volunteer

4. Additional information

4.1 One off ‘thank you’ payments

You may wish to make a one-off, unexpected payment as a gesture of thanks to your volunteer. This is sometimes referred to as an honorarium.  However, if a payment is regularly made, or expected (either by the volunteer being told of it in advance, or it being common practice to make the payment), then it will no longer be regarded as a genuine one-off payment and will be treated as any other payment to volunteers.

If you wish to make this type of payment to your volunteer, you should seek advice from HMRC or an accountant. Even a ‘thank you’ payment proven to be tax-free, will still be treated as income by Jobcentre Plus, possibly affecting benefits received by your volunteer.

There are no clear legal rules on what is or is not an honorarium, and it is not recommended that you make payments of this kind to volunteers.

4.2 Keeping records

You should ask your volunteer to complete volunteer timesheet and expenses claim form - employer template 7.5(b) each time they wish to claim expenses. They will also need to record the amount of time they have spent volunteering with you on this form.

Volunteer timesheet and expenses claim form - employer template 7.5(b)

Any payment from your Direct Payments money needs to be accounted for.  You can do this by writing the number of hours your volunteer worked, and specifying the weeks on which they worked, on a timesheet.  Your volunteer should sign the timesheet.  You should keep the timesheets in your file.

You should make all payments to volunteers by cheque or BACS via your online banking or pre-paid card You must never repay expenses in cash.