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HMRC internal manual

Tax Credits Technical Manual

Income: Employment income rules: The cash equivalent of any credit token received by the claimant chargeable to income tax under section 94 of ITEPA 2003

The Tax Credits (Definition and Calculation of Income) Regulations 2002, Reg. 4(1)(d)

A credit-token is something that merely has to be produced in order to obtain goods and services without immediate payment. These are largely credit cards made available for obtaining money, goods and services for private use.

The general rule is that income must include an amount equal to the expense incurred by the employer or third party specifically for the purpose of providing the credit-token in or in connection with the provision of the money, goods or services obtained, less any part of the expense made good to the provider by the employee.

The full rules can be found via the fourth row in the table in Employment Income Manual para EIM16140.

Note: With effect from 6 April 2017 the way in which many salary sacrifice and benefit in kind schemes are taxed will change, which means that some tax credit claimants will see an increase in their taxable income.

For the purposes of tax credits, where one of these schemes is in operation the taxable income figure should be used.