Income Tax (Earnings and Pensions) Act 2003 section 266

Exemption of non-cash vouchers for exempt benefits

Section 266 ensures that where a benefit would be tax-exempt if provided directly by the employer, the same exemption applies when the benefit is delivered through a non-cash voucher instead.

• Non-cash vouchers used to obtain certain exempt benefits — such as workplace parking, disabled employee transport, late-night travel home, third-party entertainment, or recommended medical treatment — are free from income tax to the extent they are used for those purposes.
• Vouchers that evidence an employee's entitlement to use exempt facilities — including works transport services, subsidised public bus services, cycle-to-work schemes, or employer-provided mobile telephones — are likewise exempt.
• Vouchers that can only be used for specified exempt purposes — such as travel during public transport strikes, recreational facilities, annual staff parties, armed forces leave travel, subsidised meals, eye tests, or health screenings — also escape the tax charge.
• The exemptions extend to vouchers for any minor benefit already exempted by HMRC regulations, and apply equally to all employees, including lower-paid ministers of religion who might otherwise fall outside the benefits-in-kind rules.