Income Tax (Earnings and Pensions) Act 2003 section 363

Deductions where credit-token provided

Section 363 allows employees a tax deduction where they have been provided with a credit-token to obtain goods or services, and the cost of those goods or services would have been deductible had the employee paid for them directly.

• Where an employee receives goods or services via a credit-token, the benefit is treated as earnings and subject to income tax
• If the employee would have been entitled to a tax deduction had they personally paid for those goods or services, a corresponding deduction is allowed against the credit-token benefit
• The deduction is capped at the lower of the amount treated as earnings (the credit-token benefit) or the amount that would have been deductible had the employee paid directly
• The deductibility test is based on the rules in Chapter 2 (deductions for employee expenses) or Chapter 5 (deductions for earnings representing benefits or reimbursed expenses) of Part 5 of the Act