Volunteering is, by definition, unpaid. But, as a charity, it’s good practice to reimburse volunteers’ travel and other expenses.
Volunteers are the backbone of the charity sector, giving up billions of hours of their time each year. Making sure they aren’t out-of-pocket acknowledges their immense contribution. Plus, it encourages those who might not have considered volunteering for financial reasons to join in too.
But what counts as a travel expense for volunteers? How do you go about reimbursing travel and other expenses? And what’s the best way to manage the process without getting bogged down in admin?
HMRC says that, as a rule, volunteers’ out-of-pocket expenses don’t have tax implications. This is because there can only be a tax liability if a person holds an office or is employed and earns money from that office or employment. Volunteers aren’t employees. And while they may hold offices with charities, they don’t usually earn money from them.
The upshot is that you can reimburse your volunteers without having to worry about reporting to HMRC or deducting income tax and National Insurance contributions. That said, reimbursement amounts may become taxable, and you’d have to report them if:
You pay more than what the volunteer paid out of pocket
You use scale rates and HMRC thinks what you’ve paid isn’t reasonable. Scale rates are flat rates that reimburse expenses which are ‘widely incurred in broadly similar amounts’. Travel expenses fall under this category.
According to HMRC’s guidelines, scale rates:
…should be set at a fairly modest level which, taking one day with another, will be enough to cover the relevant expenses. They should not be pitched at a level to cover the highest amount that an employee [or volunteer] might spend.
A simpler but, unfortunately, less clear answer is that what’s reasonable often depends on the circumstances. With this in mind, it’s usually a good idea to use HMRC’s own scale rates.
Because they’ve issued them themselves, HMRC accept they’re reasonable. So using them to pay back your volunteers’ travel expenses is unlikely to create issues.
HMRC has scale rates for the following travel expenses:
You can only pay these rates, called advisory fuel rates, if the volunteer uses a company car. This isn’t a good idea in a volunteering scenario, because HMRC considers a company car to be a benefit in kind. Which means you’d have to tax the volunteer on it.
HMRC’s mileage scale rates are called Approved Mileage Allowance Payments (AMAP). They apply when an employee — or, in this case, a volunteer — uses their personal vehicle on charity business.
The AMAP rates cover a proportion of:
The AMAP rates don’t cover parking, tolls, congestion charges, or other travel expenses, though. You’ll have to reimburse these separately.
The current mileage allowance payments are:
You can also pay an additional 5p per mile for every passenger.
Has a volunteer been away from home or the place where they normally volunteer? You can pay a flat rate to cover the cost of food and drink.
HMRC’s subsistence scale rates are:
HMRC says the breakfast rate and late evening meal rate are exceptional, so they wouldn’t apply if the volunteer regularly starts before 6am or works past 8pm.
If you’re strict about reimbursements and pay HMRC’s scale rates when possible, you don’t need to worry about tax deductions, National Insurance, or forms.
That said, if you rely on manual processes, the admin will still be a nightmare.
Volunteers will have to produce receipts as proof of their travel expenses. And, in the case of mileage, you’ll need to work out how much of it was for charity business. Which means volunteers will need to keep mileage logs.
Aside from potentially putting volunteers off, all this admin puts a strain on your finance team’s limited resources. There’ll be endless hours sifting through spreadsheets, matching transactions to receipts, crunching numbers, and figuring out the best way to process payments.
Sandra Curran, Purchase Ledger Coordinator at Making Space, a charity that provides social care across the UK, calls the process:
… monotonous, [and] quite messy. Some of our sites would have three-and-four-page statements. So the number of receipts that would come through was a nightmare.
As it happens there’s another way. With Soldo, you can give your volunteers a prepaid card (as well as a virtual card) they can use to pay for expenses. This means they’re not out of pocket, so you don’t need to reimburse them. And because you can set transaction limits and restrict what kinds of purchases they can use the card for, you’re in control.
Curran says using Soldo has cut the time Making Space spent on admin from six days to half a day.
Soldo also lets you issue non-nominative cards. In other words, a card doesn’t have to be in someone’s name, so you can assign it to a volunteer and then switch to another volunteer if needs be.
Best of all, volunteers can upload receipts. And you can view transactions in real time and link everything to your accounting system, so there’s no need for manual data input.
Slash admin and focus on what matters, with Soldo.
In 2018/19, 19.4 million Brits volunteered their time, at an estimated value of £23.9 billion. Soldo can help you show your appreciation by making sure they’re not out-of-pocket. All while giving you more flexibility and freeing you up to crack on with your important work.
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