Income Tax (Earnings and Pensions) Act 2003

Chapter 4 Taxable benefits: vouchers and credit-tokens

Cash vouchers: introduction

73 Cash vouchers to which this Chapter applies

(1) This Chapter applies to a cash voucher provided for an employee by reason of the employment which is received by the employee.

(2) A cash voucher provided for an employee by the employer is to be regarded as provided by reason of the employment unless—

(a) the employer is an individual, and

(b) the provision is made in the normal course of the employer’s domestic, family or personal relationships.

(3) A cash voucher provided for an employee and appropriated to the employee—

(a) by attaching it to a card held for the employee, or

(b) in any other way,

is to be treated for the purposes of this Chapter as having been received by the employee at the time when it is appropriated.

74 Provision for, or receipt by, member of employee’s family

For the purposes of this Chapter any reference to a cash voucher being provided for or received by an employee includes a reference to it being provided for or received by a member of the employee’s family.

Meaning of “cash voucher”

75 Meaning of “cash voucher”

(1) In this Chapter “cash voucher” means a voucher, stamp or similar document capable of being exchanged for a sum of money which is—

(a) greater than,

(b) equal to, or

(c) not substantially less than,

the expense incurred by the person at whose cost the voucher, stamp or similar document is provided.

(2) For the purposes of subsection (1) it does not matter whether the document—

(a) is also capable of being exchanged for goods or services;

(b) is capable of being exchanged singly or together with other vouchers, stamps, or documents;

(c) is capable of being exchanged immediately or only after a time.

(3) Subsection (1) is subject to section 76 (sickness benefits-related voucher).

76 Sickness benefits-related voucher

(1) This section applies where—

(a) the expense incurred by the person at whose cost a voucher, stamp or similar document is provided (“the provision expense”) includes costs to that person of providing sickness benefits (“sickness benefits costs”),

(b) the voucher, stamp or document would be a cash voucher (apart from this section) but for the fact that the sum of money for which it is capable of being exchanged (“the exchange sum”) is substantially less than the provision expense, and

(c) the whole or part of the difference between the exchange sum and the provision expense represents the sickness benefits costs.

(2) The voucher, stamp or document is a cash voucher within the meaning of this Chapter if—

E = PE - D

or

EisnotsubstantiallylessthanPE - D

where—

• E is the exchange sum,

• PE is the provision expense, and

• D is the amount of the difference between E and PE which represents the sickness benefits costs.

(3) In this section “sickness benefits” mean benefits in connection with sickness, personal injury or death.

77 Apportionment of cost of provision of voucher

If a person incurs expense in or in connection with the provision of vouchers, stamps or similar documents for two or more employees as members of a group or class, the expense incurred in respect of one of them is to be such part of that expense as is just and reasonable.

Cash vouchers: exceptions

78 Voucher made available to public generally

This Chapter does not apply to a cash voucher if—

(a) it is of a kind made available to the public generally, and

(b) it is provided to the employee or a member of the employee’s family on no more favourable terms than to the public generally.

79 Voucher issued under approved scheme

(1) This Chapter does not apply to a cash voucher received by an employee if—

(a) it is issued under a scheme, and

(b) at the time when it is received the scheme is a scheme approved by the Inland Revenue for the purposes of this section.

(2) The Inland Revenue must not approve a scheme for the purposes of this section unless they are satisfied that it is practicable for income tax in respect of all payments made in exchange for vouchers issued under the scheme to be deducted in accordance with PAYE regulations.

80 Vouchers where payment of sums exempt from tax

This Chapter does not apply to a cash voucher if it is—

(a) a document intended to enable a person to obtain payment of a sum which would not have constituted employment income if paid to the person directly, or

(b) a savings certificate where the accumulated interest payable in respect of it is exempt from tax (or would be so exempt if certain conditions were met).

Benefit of cash voucher treated as earnings

81 Benefit of cash voucher treated as earnings

(1) The cash equivalent of the benefit of a cash voucher to which this Chapter applies is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee.

(2) The cash equivalent is the sum of money for which the voucher is capable of being exchanged.

Non-cash vouchers: introduction

82 Non-cash vouchers to which this Chapter applies

(1) This Chapter applies to a non-cash voucher provided for an employee by reason of the employment which is received by the employee.

(2) A non-cash voucher provided for an employee by the employer is to be regarded as provided by reason of the employment unless—

(a) the employer is an individual, and

(b) the provision is made in the normal course of the employer’s domestic, family or personal relationships.

(3) A non-cash voucher provided for an employee and appropriated to the employee—

(a) by attaching it to a card held for the employee, or

(b) in any other way,

is to be treated for the purposes of this Chapter as having been received by the employee at the time when it is appropriated.

83 Provision for, or receipt by, member of employee’s family

For the purposes of this Chapter any reference to a non-cash voucher being provided for or received by an employee includes a reference to it being provided for or received by a member of the employee’s family.

Meaning of “non-cash voucher”

84 Meaning of “non-cash voucher”

(1) In this Chapter “non-cash voucher” means—

(a) a voucher, stamp or similar document or token which is capable of being exchanged for money, goods or services,

(b) a transport voucher, or

(c) a cheque voucher,

but does not include a cash voucher.

(2) For the purposes of subsection (1)(a) it does not matter whether the document or token is capable of being exchanged—

(a) singly or together with other vouchers, stamps, documents or tokens;

(b) immediately or only after a time.

(3) In this Chapter “transport voucher” means a ticket, pass or other document or token intended to enable a person to obtain passenger transport services (whether or not in exchange for it).

(4) In this Chapter “cheque voucher” means a cheque—

(a) provided for an employee, and

(b) intended for use by the employee wholly or mainly for payment for—

(i) particular goods or services, or

(ii) goods or services of one or more particular classes;

and, in relation to a cheque voucher, references to a voucher being exchanged for goods or services are to be read accordingly.

Non-cash voucher: exceptions

85 Non-cash voucher made available to public generally

This Chapter does not apply to a non-cash voucher if—

(a) it is of a kind made available to the public generally, and

(b) it is provided to the employee or a member of the employee’s family on no more favourable terms than to the public generally.

86 Transport vouchers under pre-26th March 1982 arrangements

(1) This Chapter does not apply to a transport voucher provided for an employee of a passenger transport undertaking under arrangements in operation on 25th March 1982 which meet the condition in subsection (2).

(2) The condition is that the arrangements are intended to enable the employee or a member of the employee’s family to obtain passenger transport services provided by—

(a) the employer,

(b) a subsidiary of the employer,

(c) a body corporate of which the employer is a subsidiary, or

(d) another passenger transport undertaking.

(3) In this section—

• “passenger transport undertaking” means an undertaking whose business consists wholly or mainly in the carriage of passengers or a subsidiary of such an undertaking, and

• “subsidiary” means a wholly-owned subsidiary within the meaning of section 736 of the Companies Act 1985 (c. 6).

Benefit of non-cash voucher treated as earnings

87 Benefit of non-cash voucher treated as earnings

(1) The cash equivalent of the benefit of a non-cash voucher to which this Chapter applies is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee.

(2) The cash equivalent is the difference between—

(a) the cost of provision, and

(b) any part of that cost made good by the employee to the person incurring it.

(3) In this Chapter the “cost of provision” means, in relation to a non-cash voucher, the expense incurred in or in connection with the provision of—

(a) the voucher, and

(b) the money, goods or services for which it is capable of being exchanged,

by the person at whose cost they are provided.

(4) In the case of a transport voucher, the reference in subsection (3)(b) to the services for which the voucher is capable of being exchanged is to the passenger transport services which may be obtained by using it.

(5) If a person incurs expense in or in connection with the provision of non-cash vouchers for two or more employees as members of a group or class, the expense incurred in respect of one of them is to be such part of that expense as is just and reasonable.

(6) This section is subject to section 89 (reduction for meal vouchers).

88 Year in which earnings treated as received

(1) In the case of a non-cash voucher other than a cheque voucher, the amount treated as earnings under section 87 is to be treated as received—

(a) in the tax year in which the cost of provision is incurred, or

(b) if later, in the tax year in which the voucher is received by the employee.

(2) In the case of a cheque voucher, the amount treated as earnings under section 87 is to be treated as received in the tax year in which the voucher is handed over in exchange for money, goods or services.

(3) Where a cheque voucher is posted it is to be treated as handed over at the time of posting.

89 Reduction for meal vouchers

(1) This section applies where—

(a) the non-cash voucher is a meal voucher,

(b) it is provided for an employee for use on a working day, and

(c) meal vouchers are made available to all employees (if any) employed by the same employer in lower-paid employment within the meaning of Chapter 11 of this Part (see section 217).

(2) The total of the cash equivalents of the benefit of any meal vouchers so provided is to be reduced by 15p for each working day for which the vouchers are provided.

(3) In this section—

• “meal voucher” means a non-cash voucher which—

  (a)

  can only be used to obtain meals,

  (b)

  is not transferable, and

  (c)

  is not of the kind in respect of which no liability to income tax arises under section 266(3)(e) (subsidised meals), and

• “working day” means a day on which the employee is at work.

(4) Section 83 (references to provision for an employee include provision for a member of the employee’s family) does not apply to subsection (1)(b).

Credit-tokens: introduction

90 Credit-tokens to which this Chapter applies

(1) This Chapter applies to a credit-token provided for an employee by reason of the employment which is used by the employee to obtain money, goods or services.

(2) A credit-token provided for an employee by the employer is to be regarded as provided by reason of the employment unless—

(a) the employer is an individual, and

(b) the provision is made in the normal course of the employer’s domestic, family or personal relationships.

91 Provision for, or use by, member of employee’s family

For the purposes of this Chapter—

(a) any reference to a credit-token being provided for an employee includes a reference to it being provided for a member of the employee’s family, and

(b) use of a credit-token by a member of an employee’s family is to be treated as use of the token by the employee.

Meaning of “credit-token”

92 Meaning of “credit-token”

(1) In this Chapter “credit-token” means a credit card, debit card or other card, a token, a document or other object given to a person by another person (“X”) who undertakes—

(a) on the production of it, to supply money, goods or services on credit, or

(b) if a third party (“Y”) supplies money, goods or services on its production, to pay Y for what is supplied.

(2) A card, token, document or other object can be a credit-token even if—

(a) some other action is required in addition to its production in order for the money, goods or services to be supplied;

(b) X in paying Y may take a discount or commission.

(3) For the purposes of this section—

(a) the use of an object given by X to operate a machine provided by X is to be treated as its production to X, and

(b) the use of an object given by X to operate a machine provided by Y is to be treated as its production to Y.

(4) A “credit-token” does not include a cash voucher or a non-cash voucher.

Credit-tokens: exception

93 Credit-token made available to public generally

This Chapter does not apply to a credit-token if—

(a) it is of a kind made available to the public generally, and

(b) it is provided to the employee or a member of the employee’s family on no more favourable terms than to the public generally.

Benefit of credit-token treated as earnings

94 Benefit of credit-token treated as earnings

(1) On each occasion on which a credit-token to which this Chapter applies is used by the employee in a tax year to obtain money, goods or services, the cash equivalent of the benefit of the token is to be treated as earnings from the employment for that year.

(2) The cash equivalent is the difference between—

(a) the cost of provision, and

(b) any part of that cost made good by the employee to the person incurring it.

(3) In this section the “cost of provision” means the expense incurred—

(a) in or in connection with the provision of the money, goods or services obtained on the occasion in question, and

(b) by the person at whose cost they are provided.

(4) If a person incurs expense in or in connection with the provision of credit-tokens for two or more employees as members of a group or class, the expense incurred in respect of one of them is to be such part of that expense as is just and reasonable.

General supplementary provisions

95 Disregard for money, goods or services obtained

(1) This section applies if the cash equivalent of the benefit of a cash voucher, a non-cash voucher or a credit-token—

(a) is to be treated as earnings from an employee’s employment under this Chapter, or

(b) would be so treated but for a dispensation given under section 96.

(2) Money, goods or services obtained—

(a) by the employee or another person in exchange for the cash voucher or non-cash voucher, or

(b) by the employee or a member of the employee’s family by use of the credit-token,

are to be disregarded for the purposes of the Income Tax Acts.

(3) But the goods or services are not to be disregarded for the purposes of applying sections 362 and 363 (deductions where non-cash voucher or credit-token provided).

(4) In the case of a transport voucher, the reference in subsection (2)(a) to the services obtained in exchange for the voucher is to the passenger transport services obtained by using it.

96 Dispensations relating to vouchers or credit-tokens

(1) This section applies where a person (“P”) supplies the Inland Revenue with a statement of the cases and circumstances in which—

(a) cash vouchers,

(b) non-cash vouchers, or

(c) credit-tokens,

are provided for employees whether they are the employees of P or some other person.

(2) If the Inland Revenue are satisfied that no additional tax is payable by virtue of this Chapter by reference to the vouchers or credit-tokens mentioned in the statement, they must give P a dispensation under this section.

(3) A “dispensation” is a notice stating that the Inland Revenue agree that no additional tax is payable by virtue of this Chapter by reference to the vouchers or credit-tokens mentioned in the statement supplied by P.

(4) If a dispensation is given under this section, nothing in this Chapter applies to the provision or use of the vouchers or credit-tokens covered by the dispensation.

(5) If in their opinion there is reason to do so, the Inland Revenue may revoke a dispensation by giving a further notice to P.

(6) That notice may revoke the dispensation from—

(a) the date when the dispensation was given, or

(b) a later date specified in the notice.

(7) If the notice revokes the dispensation from the date when the dispensation was given—

(a) any liability to tax that would have arisen if the dispensation had never been given is to be treated as having arisen, and

(b) P and the employees in question must make all the returns which they would have had to make if the dispensation had never been given.

(8) If the notice revokes the dispensation from a later date—

(a) any liability to tax that would have arisen if the dispensation had ceased to have effect on that date is to be treated as having arisen, and

(b) P and the employees in question must make all the returns which they would have had to make if the dispensation had ceased to have effect on that date.