Income Tax (Earnings and Pensions) Act 2003 section 362

Deductions where non-cash voucher provided

Section 362 deals with the tax deductions an employee may claim when they receive a non-cash voucher that has been taxed as earnings and the voucher is used to obtain goods or services that would otherwise qualify for a tax deduction.

• Where a non-cash voucher is taxed as part of an employee's earnings, a deduction may be available if the voucher is exchanged for goods or services that would have qualified for a deduction had the employee paid for them directly.
• The voucher may be exchanged for goods or services in the same tax year or in a later year and the deduction still applies.
• The deduction is capped at the lower of the amount taxed as earnings and the amount that would have been deductible had the employee paid directly.
• This prevents double taxation by ensuring employees are not taxed on the voucher benefit where the underlying expenditure would have been an allowable deduction from earnings.