Income Tax (Earnings and Pensions) Act 2003 section 81

Benefit of cash voucher treated as earnings

Section 81 explains how the benefit of a cash voucher provided to an employee is taxed as earnings, including the special rules that apply when the voucher is provided through optional remuneration arrangements.

• The cash equivalent of a cash voucher — being the sum of money for which it can be exchanged — is treated as earnings in the tax year the employee receives it.
• Where a cash voucher is provided under optional remuneration arrangements, the taxable amount is the greater of the cash equivalent and the amount of salary or other remuneration given up in exchange for the voucher.
• If the voucher's benefit would normally be exempt from income tax but for the rules excluding certain exemptions under optional remuneration arrangements, the cash equivalent is treated as zero for the purposes of this comparison.
• In that scenario, the taxable amount defaults to the amount foregone, since the cash equivalent is deemed to be zero and the amount foregone will therefore be the greater figure.