NIM02471 and NIM02472 explain, respectively, how to calculate the exempt amount:
The following example illustrates those calculations.
Employee B has been employed by employer M since 2004. The
latter provides B with qualifying childcare vouchers twice a year:
one, with a face value of £3,000 (the chargeable expense; see
NIM02461) as part of their September
2005 earnings; the other, to the same value, as part of their March
2006 earnings.
Step 1 – calculating the chargeable expense
The chargeable expense is an amount equal to the cost of
provision - £3,000.
Step 2 – calculating the exempt amount
Employer M calculates the exempt amount using the formula E x
QW where:
QW is the number of qualifying weeks:
(a) for which the employee has been employed by the secondary contributor during the tax year in which in which the qualifying childcare voucher is provided; and
(b) for which no other qualifying childcare voucher has been provided by the secondary contributor.
But as the qualifying childcare voucher is provided during the period 6th April 2005 to 5th October 2005:
The exempt amount is calculated thus:
E = £50. For the purposes of the example, the
administrative costs have been ignored.
QW = 26. The figure in (b) of QW is zero. As this is the
first payment of childcare vouchers in the tax year, there are no
other qualifying weeks for which such vouchers have been provided.
The exempt amount is calculated as £50 x 26 =
£1,300.
As the chargeable expense of £3,000 is more than the
exempt amount, only that latter amount may be disregarded. So
employer M must include £1,700 - £3,000 minus £1,300
- in employee B’s earnings for the purposes of calculating
the amount of Class 1 NICs due.
For details of how to calculate the exempt amount in month
12, see
NIM02493.
