NIM02494 - Class 1: Vouchers - non-cash vouchers – qualifying childcare vouchers from 6th April 2005– how to calculate the exempt amount – example 3 – employee with one lump sum payment of vouchers in 2005/06 tax year – calculation based on the legislation - payment in tax month 1 – earnings paid 29th April 2005
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.
The following example illustrates those calculations.
Employee G has been employed by employer H since 1990. The
latter provides G with a year’s worth of qualifying childcare
vouchers with a face value of £6,000 (the chargeable expense;
see
NIM02461) as part of G’s April
earnings paid on 29th April 2005.
Step 1 – calculating the chargeable expense
The chargeable expense is an amount equal to the cost of
provision ie, £6,000.
Step 2 – calculating the exempt amount
Employer M calculates the exempt amount using the formula E x
QW where:
- E is the total of:
- £50; plus
- the administration costs for the voucher
- 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 figure in (a) of QW above is taken as 26; and
- the maximum amount that can be exempted during that period is £1,300.
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.
But as the chargeable expense of £6,000 is more than the
exempt amount, only that latter amount may be disregarded. So
employer H must include £4,700 in employee G’s earnings
for the purposes of calculating the amount of Class 1 NICs due.
For examples showing the calculation of the exempt amount for
vouchers provided:
- on a regular monthly basis in the 2005/06 tax year, see NIM02476 (contents)
- in two lump payments in tax months 6 and 12 of the 2005/06 tax year, see NIM02492 and NIM02493 respectively.
