Members Allowances

What are Members Allowances?

Members Allowances are lump sum payments made to Councillors, including the Chair or Mayor . They are not reimbursements of expenses, or mileage payments.

The legal framework for Members Allowances are set out in the Members Allowances Regulations 2003 and if a local council decides to pay allowances, whether just to the Chair or Councillors generally, they must be set in accordance with the regulations

Who can receive members allowances?

Members allowances can only be paid to elected members of the Council (see Para 24 (b) Members Allowances Regulations 2003). So co-opted Councillors cannot receive Members Allowances.

All allowances paid are to be calculated pro rata for the year (see Para 25 (2) Members Allowances Regulations 2003)

How are members allowances set?

A Parish Council can set a Parish Basic Allowance. This can be one allowance to be available to all Councillors, one allowance just for the Chair, or two different allowances one rate for Councillors and another for the Chair. When it sets the allowance the Council must 'have regard' to 'to the recommendations which have been made in respect of it by a parish remuneration panel ' (see Para 25 Members Allowances Regulations 2003)

It should be noted that there is no provision in the Regulations for a different rates of allowance to be paid to a Vice-Chair or Chairs of Committees. There can only be two rates of allowances set, one for all Councillors and one for the Chair.

What is the difference between a Mayors/Chairs Allowance and allowances paid to Councillors?

Other that the fact that a different rate can be paid to the Chair, or an allowance can be paid only to the Chair, there is no difference. This is particularly relevant for taxation purposes as Councils often believe that a Chairs allowance can be paid without being paid through payroll. The tax treatment of allowances is the same whether they are Councillors Allowances or a Chairs Allowance.

What is the tax status of Members Allowances?

Round Sum Allowances paid, whether to an employee or to a Councillor, are taxable under PAYE. This includes any lump sum allowance paid to the Chair or Mayor. HMRC Guidance is very clear, Members Allowances, including any allowance paid to the Chair, are taxable under PAYE.

If payments are made as reimbursements of expenses, supported by receipts or mileage claims at HMRC approved mileage rates, then these can be paid without PAYE, just as they can be to members of staff.

Publication

There are two main publication requirements in respective of Members Allowances. These are set out in Para 30 which requires Councils to publish the report of the Parish Remuneration Panel and make it available on request to 'any person'. The second is Para 31 which requires a Council to keep records of allowances paid and to publish them 'As soon as reasonably practicable after the end of a year'.

It is quite common to find Councils who are unaware that they need to do this.

Useful Links

Members Allowances Regulations 2003 - Parish Councils

Members Allowances Regulations 2003 - Full version

HMRC Manual - Taxation of Members Allowances