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Income Tax (Earnings and Pensions) Act 2003


287.This Chapter sets out the amount charged on the benefit of certain cash vouchers, non-cash vouchers and credit-tokens which are provided by reason of an employee’s employment. The cash equivalent of the benefit is treated as earnings from the employment.

288.The sections in this Chapter derive from sections 141 to 144 of ICTA.

289.Chapter 6 of Part 4 of this Act contains a number of exemptions from the charge on the benefit of vouchers and credit-tokens.

290.This Chapter is not listed in section 216 of this Act (provisions not applicable to lower-paid employments). Lower-paid employees are therefore not excluded from the charge.

Section 73: Cash vouchers to which this Chapter applies

291.This section sets out the cash vouchers to which this Chapter applies. It derives from section 143(1) of ICTA.

292.If an employer who is an individual provides such a voucher for personal reasons, it is not regarded as provided by reason of the employment. The disregard of vouchers provided by an individual for personal reasons is a minor change to the law. See Change 18 in Annex 1.

293.Subsection (3) determines the time of receipt for a cash voucher appropriated to the employee. This is particularly relevant for the operation of PAYE.

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

294.This section extends provision for or receipt by the employee of a cash voucher to provision for or receipt by a member of the employee’s family. It derives from section 144(4) of ICTA.

295.“Members of the employee’s family” is defined in section 721(4) of this Act.

Section 75: Meaning of “cash voucher”

296.This section defines “cash voucher” for the purposes of this Chapter. It derives from section 143(3) of ICTA.

297.Subsection (1) sets out the definition. It does not require a cash voucher to be exchangeable wholly for cash. The amount of cash must be “not substantially less than” the cost to the employer. “Substantially” is not defined.

298.The section makes it explicit that the “voucher” provided at the expense of the person bearing the cost includes a “stamp or similar document”. This is implicit in ICTA by virtue of section 143(3). See Note 15 in Annex 2.

299.Subsection (2) further clarifies what is or is not a cash voucher for the purposes of this Chapter. A voucher which is not a “cash voucher” may be a “non-cash voucher” to which section 82 of this Act applies.

Section 76: Sickness benefits-related voucher

300.This section modifies the meaning of “cash voucher” where the expense incurred by the provider of the voucher includes costs of providing sickness benefits and the sum of money for which the voucher can be exchanged is substantially less than the total cost to the provider. It derives from section 143(4) of ICTA.

301.The modification effectively removes the sickness benefits element when testing whether the voucher is a cash voucher.

302.Subsection (1) sets out the circumstances in which the section applies.

303.Subsection (2) provides two formulae to be used in determining whether the voucher is a cash voucher. The use of the formulae is best illustrated by examples:-

Example 1

The exchange sum E is £60.

The provision expense PE is £150

The cost of providing the sickness benefits is £90.

£150(Pe) – £60(E) = £90

The cost of providing the sickness benefits is £90, so D = £90.

Putting these values into the formula: £150(PE) – £90(D) = £60

£60(E) = £150(PE) – £90(D), so the voucher is a cash voucher.

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