SE16010 - Vouchers and credit-tokens: why special rules are needed for vouchers and credit tokens

Sections 19(1)1, 141, 142 and 143 ICTA 1988

An employee who is not within Part V Chapter II ICTA 1988 (see SE20100) who receives goods from his employer by virtue of the employment is only chargeable under Section 19(1)1 ICTA 1988. The Section 19(1)1 charge is on the amount the employee could sell them for, their second-hand value, less anything the employee pays for them (see SE00540).

The second-hand value of the goods may be much less than what it cost the employer to provide them. As this difference between cost and market value was being increasingly exploited, special rules applying to all employees were introduced in 1975. These rules secured a tax charge based on the full cost to the employer when goods were obtained by an employee using a voucher or credit-token.

The scope of these special rules went beyond goods. They cover the provision of goods, services or money to an employee by use of a voucher or credit-token.

The important thing to note is that where the special rules apply, the normal principles for determining the amount chargeable on the employee under Section 19(1)1 at SE00540 do not apply. The charge must be calculated by reference to the special rules at SE16140.

These special rules are not so important now most employees are within Part V Chapter II ICTA 1988 (see SE20100). There will be the same, or a similar tax charge whether or not something is provided directly or via a voucher or credit-token.