EIM11840 – PAYE: special type of income: cash vouchers

Part 11 Chapter 4 ITEPA 2003

Part 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 cash vouchers – Section 693 ITEPA 2003

When an employee receives a cash voucher to which Part 3 Chapter 4 applies by reason of the employment, for the purposes of the PAYE regulations, 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 sum of money for which the voucher is capable of being exchanged.

A cash voucher provided for an employee and appropriated to the employee by attaching it to a card held for the employee, or in any other way, is treated as having been received by the employee at the time when it is appropriated.

Exceptions

The employer is not required to operate PAYE on the provision of a cash voucher if either the voucher or money obtained in exchange for the voucher:

• is used to meet allowable expenses and
• if the money had been paid directly to the employee by the employer, the amount would not have been PAYE income.