How to Value Community Contributions
Historic England’s commitment to working co-productively, involving participants in decision-making processes and seeking their opinions on project development can itself contribute to a sense that participants are valued but it is not the only option available to you. It is very important to properly value time given by people to projects. Reimbursement of expenses incurred is essential but that is not always straightforward. There are several additional ways to recognise people’s contribution.
1. Reimbursement of Expenses
Covering out-of-pocket expenses that participants incur while contributing to a project is the minimum you should expect to do. This can include travel, materials, or other costs (such as the cost of childcare or other caring provision) directly related to their participation.
When providing funding to reimburse expenses to individuals participating in a project you must consider the following topics.
Define the nature of the funding
Clearly define that the funding is intended to reimburse expenses (e.g. travel, meals, childcare) incurred during participation. This should be distinguished from payments that might be seen as compensation for time or services. If the funding solely covers reasonable out-of-pocket expenses, it is less likely to be classified as taxable income or subject to employment law requirements.
Tax implications
Reimbursements for actual expenses are generally non-taxable if they are supported by appropriate receipts and records and fall within HMRC’s guidelines. However, if the funding exceeds reasonable expenses or compensates for time, it could be treated as income and thus subject to income tax. Funding that qualifies as reimbursement for expenses typically does not attract National Insurance Contributions. However, if it is treated as income, National Insurance Contributions could apply.
Employment law
It’s important to clearly define participants’ status as participants rather than employees or contractors. Reimbursing participants for their expenses is generally permissible without creating an employment relationship. However, paying participants more than their expenses could inadvertently trigger employment rights, such as the National Minimum Wage and other worker protections.
Impact on government benefits
When individuals are in receipt of Universal Credit or other benefits, reimbursed expenses typically do not affect their benefits if they are correctly categorised and documented. However, if the funding is seen as income or if it exceeds the actual expenses, it may impact their benefit calculations.
Keeping clear records, such as receipts, helps demonstrate that the funding is strictly for reimbursement and not for personal income, which is important for those in receipt of benefits.
Documentation and transparency
Provide participants with clear documentation outlining the terms of the funding. Specify that the funding is intended to reimburse legitimate expenses related to their participation, and ensure they understand the limits of what can be reimbursed.
Maintain accurate records of the expenses being reimbursed. This includes collecting and retaining receipts or proof of expenditure to substantiate the funding provided to participants.
Childcare or other caring costs
When covering childcare or other care costs you should ensure that care is being provided by registered providers and paid at local rates.
Students and academic participation
For students participating in academic research or similar projects, reimbursed expenses are generally not taxable, provided they are not connected to employment. As long as the funding is tied directly to participation and covers actual expenses, there are no additional tax or reporting obligations.
Charitable and non-profit projects
If the project is run by a charity or non-profit, they are typically allowed to reimburse participants for out-of-pocket expenses without tax or employment implications. Care must be taken to ensure that the amount reimbursed does not exceed what is reasonable for the specific costs incurred.
Practical Example
If you provide funding of £100 to cover a participant’s travel and meals during a community project:
- Ensure the funding does not exceed actual travel and meal expenses
- Collect and retain receipts for travel tickets and meal costs to demonstrate that the funding is purely reimbursement
- If the participant is receiving government benefits, advise them to declare the funding as reimbursement for expenses, if necessary, to avoid any impact on their entitlements.
For more detailed information on the definition and payment of expenses you can visit:
• UK Government advice on Volunteer opportunities, rights and expenses: Pay and expenses
• UK Research and Innovation (UKRI)
For precise legal advice or detailed inquiries, consulting a legal professional is always recommended to ensure compliance with current laws and regulations.
2. Offering Gift Vouchers or Tokens
Providing small tokens of appreciation, such as gift vouchers or small gifts, is a common practice. Ensure that these are within reasonable value limits and comply with any tax implications.
You can provide one-off unrestricted vouchers for goods and services as a reward for participation in projects or research under UK tax law. However, there are important tax implications that both the provider and the recipient should consider. Here are the key points regarding such vouchers:
Tax treatment of vouchers for the provider
If the vouchers are provided as part of a research or project activity, and the purpose is to reward participants, the cost of the vouchers may be deductible as a business expense for the company or organisation providing them.
The treatment of VAT on the vouchers depends on whether the vouchers are single-purpose or multi-purpose.
- Single-Purpose Vouchers: These are vouchers that can only be used for one type of good or service (e.g., a voucher for a specific store). VAT is accounted for at the time the voucher is issued
- Multi-Purpose Vouchers: These can be used for various goods or services. VAT is accounted for at the time the voucher is redeemed.
Tax treatment for the recipient
Vouchers provided as a reward for participation in a project or research are generally considered non-cash income under UK tax law. Therefore, they are typically treated as taxable income for the recipient. The recipient may need to declare the value of the voucher as income and pay Income Tax on it.
If the voucher is provided in a personal capacity (i.e. the participant is not an employee or contractor), they may need to report this income through a self-assessment tax return.
National Insurance Contributions (NICs)
For self-employed individuals or those not directly employed, NICs may not be applicable, but the value of the voucher would still need to be reported for Income Tax purposes.
One-off nature
The fact that the voucher is one-off does not exempt it from being taxable. Even if the reward is provided for a one-time contribution, the tax treatment applies based on the value of the voucher and the circumstances of the recipient. However, since it is a one-time reward, it would not create a recurring income tax liability, but the recipient must report it for the tax year in which it was received.
Multi-purpose vouchers
Since multi-purpose vouchers can be exchanged for almost any good or service, HMRC treats them as taxable income.
Consideration for Universal Credit and other benefits
For individuals on means-tested benefits like Universal Credit, the receipt of a one-off unrestricted voucher may be considered income and could affect their benefit entitlement. The value of the voucher may reduce the recipient’s Universal Credit payments or other means-tested benefits.
It’s essential for recipients to report such vouchers to the Department for Work and Pensions (DWP) to avoid overpayments or sanctions.
Summary and links to more detailed information
Providing one-off unrestricted vouchers as a reward for participation in projects or research is permissible under UK tax law, but:
- The provider may deduct the cost as a business expense and may be subject to VAT, depending on the type of voucher
- The recipient must typically treat the voucher as taxable income, whether they are employed or self-employed, and may need to report it via Self-Assessment
- National Insurance Contributions (NICs) may also apply
- For those on Universal Credit or other means-tested benefits, the vouchers could impact their benefit entitlement
- Both parties should ensure they are compliant with tax reporting requirements and understand the potential effects on benefit entitlements.
For more detailed information on this subject see:
• Expenses and benefits: vouchers: What to report and pay - GOV.UK
• Payments to participants- Low Incomes Tax Reform Group
3. Training and Continued Professional Development Opportunities
Offering participants access to training, workshops, or professional development can be a valuable form of appreciation that also impacts their future.
Setting up a certification of skills development to recognise participants' time on a project can be an effective way to value and acknowledge their contributions. This approach benefits both the participants (by providing them with a tangible credential) and the project, as it encourages greater engagement and provides formal recognition.
By setting up a clear, structured certification process, you can provide participants with meaningful recognition that can boost their career prospects, while also valuing their time and contributions.
To find out more about setting up accredited CPD programmes with your project you should contact the most relevant accreditation body such as the Chartered Institute for Archaeologists for archaeological projects.
4. Investment in community programmes/ assets
On a small scale you can invest in resources and materials that communities might need long term (such as furniture or services to develop a website) as a way to value a groups participation in a project.
On a larger scale, under UK law you can invest in community projects, programs, or assets as a method of valuing community participation in a project. There are various legal frameworks that support this, such as community shares, CICs, and Social Impact Bonds, which provide both financial and social returns. These structures ensure that the community benefits from investment while providing participants with recognition for their time and effort.
For more detailed information, you can refer to:
5. Social events
Hosting appreciation events or gatherings, such as a thank-you dinner or a celebratory event, can help build a sense of community and recognise participants' efforts.
6. Recognition and Acknowledgment
Publicly acknowledging participants' contributions through certificates, awards, public mentions or credit in publications can also be a meaningful way to show appreciation.
