What does section 77 of the Income Tax (Earnings and Pensions) Act 2003 require?

Section 77 requires that when vouchers, stamps, or similar documents are provided to two or more employees as a group, the total cost incurred in or in connection with their provision must be apportioned among those employees on a basis that is just and reasonable in the circumstances.

How should the cost of bulk vouchers be apportioned among employees under United Kingdom tax law?

The cost must be divided on a just and reasonable basis. If all employees receive identical vouchers, an equal split is appropriate. If vouchers differ in value or type, a proportionate allocation reflecting what each employee actually received would be more suitable. No specific formula is prescribed by the legislation.

Does section 77 cover expenses beyond the direct cost of the vouchers themselves?

Yes, section 77 uses broad language covering any expense incurred 'in or in connection with' the provision of vouchers. This includes associated administrative or delivery costs forming part of the overall expense, which must also be apportioned among the employees on the same just and reasonable basis.

Can you give an example of apportioning voucher costs under section 77?

If an employer buys gift vouchers for 10 employees at a total cost of £500 including delivery, and each employee receives an identical voucher, the cost is apportioned equally. Each employee is attributed £50, which becomes the figure used when calculating their individual taxable amount arising from the voucher.

Income Tax (Earnings and Pensions) Act 2003 section 77

Apportionment of cost of provision of voucher

Section 77 provides a rule for fairly splitting the cost of providing vouchers when they are provided to a group of employees rather than to individuals separately.

When vouchers, stamps, or similar documents are provided to two or more employees as a group, the cost must be apportioned among them
The apportionment must be on a basis that is just and reasonable in the circumstances
This rule applies to any person who incurs expense in or in connection with the provision of the vouchers
The term "voucher" in this context includes stamps and similar documents, not just traditional vouchers

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