EIM21675 – Particular benefits: canteen arrangements that are chargeable to income tax

Section 317 ITEPA 2003

HMRC has become aware of certain commercially marketed arrangement that do not fall within the Section 317 exemption. The details of the schemes vary but some of the following features may be seen:

• the employer makes money or value available to participating employees. This is used by employees to purchase food and drink in the workplace
• each participating employee has an account or “purse” in which the money or value is held
• the account or purse may exist in the accounting system that supports the canteen or on smart cards held by the employees
• money or value is credited to an account or “purse” on a daily, weekly or monthly basis
• Employees may add money or value to the account from their own taxed income. These “top ups” are used to purchase food and drinks when amounts credited by the employer are exhausted
• Money or value can be used to obtain food and drinks from a range of restaurants, coffee shops and vending machines in the workplace. The retail outlets link into a common accounting/tracking system
• Tills and vending machines in the workplace require the provision of a card or the entry of a PIN to enable employees to access and draw on funds in their accounts
• Arrangements may be linked to salary sacrifice. Employers deposit matching amounts into the canteen account or purse. Once funds are exhausted, “top-ups” may be used to fund consumption until the next employer deposit is made

• Analysis

These schemes are not within the Section 317 exemption. Canteen arrangements that provide employees with money or value do not provide “…free or subsidised meals…” within the meaning the meaning of Section 317. These arrangements simply place funds at the disposal of participating employees. They can spend the funds as they like, within the limitations they have agreed to. The provision of money or value is taxable as earnings within the definition provided by Section 62,

• Tax and NICs consequences

Employers should treat amounts credited to canteen accounts as earnings for the purposes of PAYE and Class 1 NICs.