SE64500 – Tax treatment of Holiday Pay Stamp Fund Schemes: general

Holiday pay derived from Holiday Pay Stamp Fund Schemes is paid under deduction of tax.

The method of operation of such schemes may vary slightly from fund to fund but, in general, stamps are purchased by the employer from the fund for all eligible employees and are affixed weekly to stamp cards. The card is strictly the property of the employee but is usually retained by the employer who returns it to the employee when the employment ceases.

On the last day before the beginning of a holiday, the employer pays the employee the holiday pay value of the stamps. (In some schemes the face value of the stamps represents two elements, holiday pay and death, sickness and other benefits. The employer pays holiday pay and secures reimbursement from the fund only by reference to the holiday pay element.) The employer then submits the card to the fund and obtains reimbursement of the amount he has paid the employee. The fund itself makes direct payment to the employee or his representatives where he has left the industry, emigrated, become unemployed, joined the armed forces or has died.

The arrangements normally provide for three weeks' holiday, one week at Christmas and two weeks in the summer. Stamps affixed in the period from April to July usually provide the holiday pay for the Christmas of the same year. Stamps affixed in the period August to March usually provide the holiday pay for the following summer. Some funds have arrangements to provide holiday pay for additional days of holiday. Again, entitlement is based on the stamps affixed in some earlier period.