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HMRC internal manual

Employment Income Manual

Vouchers and credit-tokens: expenses incurred in providing a voucher or credit token

Statement of Practice 6/1985

For a description of the measure of the liability under the vouchers and credit-token legislation see EIM16140.

Sometimes goods and services that the employer sells in the course of its business are provided free to the employee, through a voucher. In such a case the points made in Pepper v Hart (65TC421) apply just as much as if no voucher was involved. For the measure of the expense in such a case see EIM21110 onwards.

Statement of Practice SP6/85 outlines the expenses that should be included in the calculation of any liability under the voucher legislation. This applies whether or not the goods and services obtainable with the voucher are ones the employer sells in the course of its business. The expenses that should be included in the cash equivalent of the benefit are those that contribute more or less directly to the benefit received by the employee. Some expenses may be associated with the voucher, etc but do not add to its value from the employee’s point of view, for example, the cost to the employer of devising and planning an incentive scheme.

Statement of Practice SP6/85 sets out the costs that should be included or excluded from any valuation as follows:

“A. Expenses included in the computation of emoluments:

* cost of buying the goods or providing services
* cost of selecting and testing those goods or services
* cost of storing, distributing and installing the goods or, if appropriate, services
* cost of servicing and other after sales expenses
* where a third party is used to distribute the awards or to run an incentive campaign, his fees for handling the functions above.

B. Expenses excluded from the computation of emoluments:

* cost of management time in considering whether or not to launch a scheme
* cost of researching, devising and planning such a scheme
* cost of preparing and printing promotional material
* cost of administration (including the costs of meeting the Inland Revenue's requirements) except for the functions covered in A above
* where a third party is involved, as in A above, his or her fees for handling functions within B."