NIM02491 - Class 1: Vouchers - non-cash vouchers – qualifying childcare vouchers from 6th April 2005 – how to calculate the exempt amount – example 1 – employee with regular monthly payment of vouchers in 2005/06 tax year – simplified method of calculation

NIM02471 and NIM02472 explain, respectively, how to calculate the exempt amount:

• generally; and
• in respect of a qualifying childcare voucher provided during the period 6th April 2005 and 5th October 2005.

NIM02473, though, explains that an employer may calculate the exempt amount using a simplified method. The following example illustrates that method

As part of their monthly salary from employer T, employee P gets qualifying childcare vouchers of £217 (the chargeable expense; see NIM02461). In order to work out what amount of the chargeable expense it may disregard in calculating employee’s P’s earnings, employer T must convert the exempt amount of £50 to a monthly equivalent. It does this by multiplying £50 by x 4.333 (ie, four and a third) and rounding up the answer to the nearest whole pound, as follows:

£50 by x 4.333 = £216.65, rounded up to £217.00.

Which means that employer T may disregard the whole of the chargeable expense of the vouchers for the purposes of calculating employee P’s earnings. The total amount disregarded in the 2005/06 tax year will be £2,604 (12 x £217).

For an example showing how to calculate the exempt amount for qualifying childcare vouchers of £217 a month based on the legislation, see NIM02477 (contents).