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HMRC internal manual

Employment Income Manual

From
HM Revenue & Customs
Updated
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PAYE: special type of income: non-cash vouchers

Part 11 Chapter 4 ITEPA 2003Part 3 Chapter 4 ITEPA 2003 sets out the amount charged to tax on the benefit of certain cash vouchers, non-cash vouchers and credit-tokens that are provided by reason of an employee’s employment (see

EIM16010 onwards).

For cash and non-cash vouchers the amount charged to tax is treated as earnings of the year of assessment in which the voucher is received. For credit-tokens the amount charged to tax is treated as earnings of the year of assessment in which the credit-token is used.
### PAYE on non-cash vouchers – Section 694 ITEPA 2003When an employee receives a non-cash voucher by reason of the employment and the voucher:

  • may be exchanged for anything, which if provided to the employee at the time the voucher is received would be regarded as a readily convertible asset, or
  • would itself be regarded as a readily convertible asset (see EIM11855)the employer is treated as making a payment of PAYE income to the employee. The employer is required to operate PAYE on an amount equal to the amount charged to tax as earnings. Broadly, the amount charged to tax as earnings is the difference between the cost of provision of the voucher and any part of that cost made good by the employee to the person incurring that cost. The cost of provision includes any expense incurred in connection with the provision of the voucher and the money, goods or services for which the voucher may be exchanged.

For example, PAYE is due on a voucher for 100 gold bars because the gold bars are a readily convertible asset (see EIM11855). Whereas PAYE is not generally due on a non-transferrable store gift voucher because neither the voucher nor the item that may be obtained using the voucher would be a readily convertible asset.