Office holders: when PAYE applies without employment

Q: How does this work in practice?

Illustration only. Priya is a self employed graphic designer. A housing charity appoints her as treasurer under its constitution and votes her an annual honorarium of £2,000. She has no contract and attends six meetings a year. The treasurer role is an office created by the constitution, so the honorarium is employment income from that office. The charity should pay it through its payroll and deduct PAYE, and Class 1 contributions follow the normal thresholds. Priya cannot simply invoice it through her consultancy: the role is not related to her profession in the way EIM03002 requires. If the charity instead paid only her actual travel costs to meetings and nothing else, section 299B would exempt those payments and there would be nothing to put through payroll.

An office holder is someone appointed to a position that exists independently of the person who fills it, such as a company director, company secretary, trustee or club treasurer. Section 5 of the Income Tax (Earnings and Pensions) Act 2003 applies the employment income rules to offices exactly as they apply to employments, so any pay from an office is taxed through PAYE even when there is no contract of employment. Class 1 National Insurance normally follows as well.

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What makes a position an office rather than a job?

There is no full statutory definition. Section 5(3) of ITEPA 2003 says an office includes in particular any position which has an existence independent of the person who holds it and may be filled by successive holders. HMRC’s Employment Status Manual at ESM2502 sets out the case law behind that wording. In Great Western Railway Co v Bater, Rowlatt J described an office as a permanent, substantive position which had an existence independent from the person who filled it and which was filled in succession by successive holders. In Edwards v Clinch the courts accepted that the post need not be permanent, but it must outlast any one holder and owe its existence to some constituent instrument, such as a charter, statute, trust deed or constitution, rather than to a personal contract.

ESM2503 explains how an office is created. A post established by statute, by a company’s constitution, by a trust deed or, exceptionally, by long standing custom can be an office. The appointment of a series of people to the same job title is not enough on its own: a factory manager or head of division is not an office, because the post exists only as long as the organisation wants it. Where there is doubt, HMRC asks to see the statute or document that brings the post into being, for example a club’s rules.

Who counts as an office holder?

GOV.UK’s employment status guidance lists four sources of office:

statutory appointments, such as registered company directors or secretaries, board members of statutory bodies and Crown appointments;
appointments under an organisation’s internal constitution, such as club treasurers or trade union secretaries;
appointments under a trust deed, such as trustees;
ecclesiastical appointments, such as members of the clergy.

ESM2503 adds examples including coroners, chairs and members of tribunals, Local Veterinary Inspectors and sub postmasters, and confirms that the term director covers executive, non executive and nominee directors. A company secretary is still an office where one is appointed, although section 270(1) of the Companies Act 2006 says a private company is not required to have a secretary.

The same guidance says someone is likely to be an office holder if most of these apply: there is no contract or service agreement for the appointment; the duties are only those required by the statute, constitution or trust deed; there is no salary or regular payment; any payment is a voluntary honorarium; and the person is not under the close supervision or control of the appointing body.

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Why are office fees employment income without a contract?

For an ordinary worker, HMRC has to show a contract of service before pay is taxed as employment income, which is why the employment status tests exist. For an office holder that step is skipped. ESM2502 states that the holder of an office is automatically chargeable to tax as employment income on the earnings from it, and that it is not necessary to show a contract of service. Section 5(2) of ITEPA then reads every reference to an employee as the office holder and every reference to an employer as the person under whom the office is held.

The practical result is that the appointing body operates PAYE. GOV.UK’s office holder guidance says tax and National Insurance are deducted by the appointing body. HMRC’s Check Employment Status for Tax tool reflects the same rule: ESM11035 says that if someone performs office holder duties they are employed for tax purposes for that work, and office holders are always charged tax and National Insurance as employees.

Employment rights are a separate question. GOV.UK says office holders are neither employees nor workers for employment rights purposes, although a person can be both an office holder and an employee if they also have an employment contract with the same organisation. Our guide on whether a director is an employee covers that overlap.

Does National Insurance apply too?

Usually, yes. Section 2(1)(a) of the Social Security Contributions and Benefits Act 1992 defines an employed earner as a person gainfully employed in Great Britain either under a contract of service or in an office, including an elective office, with earnings. ESM2501 says Class 1 contributions are payable where the office brings earnings chargeable as employment income, and that the Class 1 liability remains even if, by concession or practice, the income tax is collected in a different way.

There are special cases. ESM2501 notes that employment as a Returning Officer is disregarded for National Insurance, though not for tax. Directors also have their own earnings period rules, explained in directors’ National Insurance.

What about unpaid and voluntary office holders?

Holding an office is not enough by itself: there must also be earnings. ESM2504 says officials elected under the constitution of a social club hold an office, but are only taxable if they receive earnings. Reimbursing the extra costs they incur, including travel from home to where the work is done, is not pay. EIM71100 applies the same approach to unpaid office holders in commercial organisations, the health service, further education governing bodies and the courts, and tells officers not to spend time on small amounts that simply compensate for expenses.

From 6 April 2020 that practice became law. EIM71120 explains that section 299B of ITEPA exempts the payment or reimbursement of reasonable private expenses to someone who holds a voluntary office, such as a magistrate, special constable or charity trustee, provided they get no pay or other reward for the duties. The exemption is lost if the payments do more than cover costs. EIM71100 warns that expenses paid above the costs actually incurred, or at scale rates that cannot reasonably be seen as reimbursement, suggest the person is being paid for their services, and the excess is then taxable as employment income.

Can a professional put office fees through their business?

Sometimes, but only within statutory conditions. Section 6(5) of ITEPA removes the employment income charge where section 16B or 16C of the Income Tax (Trading and Other Income) Act 2005 applies instead. These provisions enacted former extra statutory concessions from 6 April 2018.

Directors’ fees received by partners (section 16B): EIM02501 lists the conditions. The director must carry on a profession, being a director must be a normal incident of that profession and of membership of the firm, the partnership agreement must require the fees to be paid over to the firm, and the fees must be insubstantial compared with the firm’s total receipts. EIM02500 says HMRC expects a written undertaking that the fees will be included in the firm’s income.
Other offices held by professionals (section 16C): EIM03002 allows fees from an office or employment other than a directorship to be treated as professional receipts if the time spent is insubstantial compared with the profession, the office relates to the profession, and the amount is insubstantial compared with the professional receipts.

This only changes the income tax treatment. ESM2501 is clear that Class 1 National Insurance can still be due on earnings from an office even where the fees are taxed as professional receipts.

How does this work in practice?

Illustration only. Priya is a self employed graphic designer. A housing charity appoints her as treasurer under its constitution and votes her an annual honorarium of £2,000. She has no contract and attends six meetings a year. The treasurer role is an office created by the constitution, so the honorarium is employment income from that office. The charity should pay it through its payroll and deduct PAYE, and Class 1 contributions follow the normal thresholds. Priya cannot simply invoice it through her consultancy: the role is not related to her profession in the way EIM03002 requires. If the charity instead paid only her actual travel costs to meetings and nothing else, section 299B would exempt those payments and there would be nothing to put through payroll.

What mistakes come up most often?

Paying directors’ or trustees’ fees gross on invoice because there is no employment contract. The absence of a contract is irrelevant for an office.
Routing office fees through the holder’s own limited company. Section 49(1)(c) of ITEPA brings an office holder whose services relate to an office held under the client within the intermediaries rules, covered in our guide to IR35 and the off payroll rules.
Calling a fixed payment an expense allowance. Round sum or generous scale payments to an unpaid official can turn into taxable earnings.
Assuming that taxing fees as professional receipts removes National Insurance.
Not knowing whether a post is an office at all. Keep the constitution, trust deed or appointment minute on file; it is the first thing an officer asks for in an employer compliance check.

Where HMRC and the body disagree about whether National Insurance is due, the dispute can be settled by a formal section 8 decision that carries a right of appeal.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.