Update – Councillors’ Travelling Expenses to be Exempted from Tax/NIC

Update – Councillors’ Travelling Expenses to be Exempted from Tax/NIC

On 22nd July 2014 HM Treasury issued a ministerial statement advising that legislation will be introduced to provide for a specific exemption from tax and National Insurance Contributions in relation to travelling expenses for Councillors, including travelling between home and the Council offices.

This has been a contentious issue for some time now and the change in rules should put the matter beyond doubt with effect from the time that the legislation changes. However, we cannot be sure at this stage whether HMRC will still seek to recover tax/NI in respect of payments made in the past – or currently being made – where it believes that the Councillors do not qualify as having two permanent workplaces, i.e. home and the Council offices. Also, we will not know the full details of the exemption until the Autumn Statement later this year.

Therefore, we recommend that Councils continue to monitor their current position to establish their level of risk and we are of course happy to review the position. We will provide further updates on the details as we receive them.

The Ministerial Statement is reproduced below:

Written Ministerial Statement

Tax exemptions on councillors’ travel

The Financial Secretary to the Treasury (David Gauke MP): The Government is announcing today that it intends to introduce legislation to exempt from income tax and National Insurance contributions (NICs), travel expenses payments made to local councillors.

Local councillors perform a vital but frequently unsung constitutional role working on behalf of local people, often in addition to other professional and personal commitments. They are required to perform their duties in both the communities they serve and their council offices and most receive no payment other than allowances in recognition of the time and expenses they incur.

The Government wants to ensure that nobody is discouraged from representing their local community as a local councillor and therefore intends to introduce this new exemption so that in the future, travel expenses paid to local councillors, including those to cover the costs of journeys to their council offices, are not subject to income tax or NICs.

The Government will provide further details of the exemption, and the time scale for introduction, in the autumn.

HM Treasury
22 July 2014

If you would like us to review your current arrangements and advise on potential risks, please contact our Employment Taxes Director, John Harling, on 07768 446381 or via e-mail