WFM UK | Payroll UK: BIK Module - Vouchers

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Overview

Vouchers covers situations where an employer provides an employee with a voucher that the employee can use to obtain cash, goods or services. The tax and National Insurance treatment depends on whether the voucher is exchangeable for cash or is limited to goods and services only.

Vouchers that can be exchanged for cash or cash equivalents (for example, prepaid debit cards or similar instruments that can be redeemed for currency) are treated as additional earnings and subject to Income Tax and Class 1 National Insurance, in full and immediately, in the payroll.

Vouchers that are only exchangeable for goods or services (commonly referred to as non‑cash vouchers, such as retailer gift cards, shopping vouchers or entertainment tokens) are treated as a taxable benefit in kind. These benefits are included for Income Tax purposes and attract Class 1 National Insurance contributions. Some voucher types, however, are specifically disregarded in calculating an employee’s earnings for Class 1 NICs purposes, attracting only Income Tax Liability.

Within the BIK module, this benefit type is managed through two distinct Event Types, reflecting the different payroll and NIC treatment required:

• Vouchers exchangeable for cash – Immediate taxation through payroll with Income Tax and Class 1 NICs.

• Vouchers exchangeable for goods and services only (non‑cash vouchers) – Payrolled for Income Tax across the year, with Class 1 National Insurance applied.

Important: 

• Certain non-cash vouchers may be eligible for a trivial benefit or other exemptions if they meet specific criteria (e.g. cost under £50 and not cash or cash‑equivalent), but these conditions must be validated separately based on HMRC rules

  • Further exemptions to Class 1 NIC liability for non-cash vouchers can be found here

• More information on vouchers can be found here.

This article explains how these events should be applied with BIK module considerations and how to calculate the benefit value. See below for some other articles to assist with preparing and processing benefits in the BIK module:

• For creating this benefit type at company level, go to Configuring Company Benefits
• For applying benefits to employee records, go to Applying Benefits to Employees: Manual & Data Imports
• For how this looks in Payroll when processing, go to How Payrolled Benefits are Reflected in Payroll
• For National Insurance and Best Practices, please read the National Insurance and Income Tax Handling for Payrolled Benefits article

Contents

• BIK Module Configurations and Considerations
• Event Type: Vouchers exchangeable for cash
  • Working out the Taxable Amount
• Event Type: Vouchers exchangeable for goods and services only (non‑cash vouchers)
  • Working out the Taxable Amount

BIK Module Configurations and Considerations

Vouchers are technically treated as a one-off event, not a time-based benefit held over a period of time (such as a Health plan/medical benefit). The full taxable value arises at the point of transfer and should not be reduced based on duration.

Please Note: If the benefit is a Trivial Benefit but you still wish to record this in the BIK module, then consider using the "Other" Benefit type, also selecting the event type that attracts no Income Tax or National Insurance Liability. See here for more information: BIK Module - Other Items

Company-Level Configuration

When configuring this benefit at company level: 

• Set the benefit to retain until the end of the tax year for leavers to ensure the taxable value is always fully applied.

• Since this is a single transaction, do not configure pro-rating based on duration of employment.

Employee-Level Configuration

When configuring this benefit at employee level, within the current version of the BIK module, Benefit Start and Benefit Stop dates are used to calculate pro-rated values. While this logic is appropriate for ongoing benefits, it does not automatically align with the treatment of one-off events.

• Enter the full value of the payment as the benefit value

• Set the Benefit Start and Benefit Stop dates to the full tax year to avoid incorrect pro-rating.

With this configuration, even if the employee leaves, the full taxable value of the payment will be taxed correctly.

Ongoing Enhancements

The current release of the BIK module fully supports compliant processing of this benefit type for income tax purposes. While certain behaviours, such as date-based pro-rating, require deliberate configuration for this benefit type, the correct legislative outcome can be achieved through the setup approach outlined above.

Employers can therefore operate this benefit accurately by applying the prescribed configuration.

Future enhancement phases will further refine benefit-specific behaviour to reduce manual intervention, increase automation, and more closely reflect the distinct legislative treatment of one-off benefit events such as Assets Transferred.

Event Type: Vouchers exchangeable for cash

Vouchers exchangeable for cash are treated as earnings, not a traditional benefit in kind. This Event Type covers vouchers that can be converted directly into money or used in a way that is effectively the same as receiving cash, such as cash cards, certain gift cards, or vouchers that can be redeemed for a monetary amount.

Because these vouchers are treated as earnings, the tax and National Insurance liability arises immediately when the voucher is provided to the employee. Unlike many other benefits, this Event Type is not suitable for spreading or payrolling across the tax year.

Because this event type attracts Class 1 National Insurance, please read the National Insurance and Income Tax Handling for Payrolled Benefits article.

Working out the Taxable Amount

The taxable value (Cash Equivalent) is the full value of the voucher provided to the employee. Vouchers are taxed based on their face value or cost to the employer, and employee contributions are not typically relevant to the calculation. Where an employee payment exists, the arrangement should be reviewed, as it may indicate that the scenario is not being treated as a voucher benefit.

If an employer provides an employee with a £500 prepaid card that can be withdrawn as cash or transferred to a bank account, the full £500 is treated as taxable earnings:

£500
(Amount of Cash Voucher provided to Employee)

minus

£0
(Amount paid by the employee, as a contribution toward the taxable benefit)

equals

£500
£500 is the taxable amount (or Cash Equivalent) to apply to the employee as a benefit.

Event Type: Vouchers exchangeable for goods and services only (non‑cash vouchers)

Vouchers exchangeable for goods and services only, often referred to as non-cash vouchers, cover situations where a voucher cannot be converted into cash but can be used to obtain specific goods or services. Examples include retailer gift vouchers, store cards restricted to purchases, or vouchers redeemable for particular services.

Under rules set by HM Revenue & Customs, these vouchers are treated as a benefit where the employee receives value that is not cash, and therefore, the tax treatment differs from cash vouchers. Income Tax can be collected through payrolling, spreading the taxable value across the remaining pay periods in the tax year where appropriate. Class 1 National Insurance is calculated via payroll because the provision of a non-cash voucher is treated as earnings for NIC purposes.

Because this event type attracts Class 1 National Insurance, please read the National Insurance and Income Tax Handling for Payrolled Benefits article.

Working out the Taxable Amount

The taxable value (Cash Equivalent) is generally the cost to the employer of providing the voucher, or the voucher’s face value, where this reflects the cost and employee contributions are not typically relevant to the calculation. Where an employee payment exists, the arrangement should be reviewed, as it may indicate that the scenario is not being treated as a voucher benefit.

If an employer provides an employee with a £300 retailer gift voucher that can only be used to purchase goods in that store, the £300 represents the taxable value:

£300
(Amount of Cash Voucher provided to Employee)

minus

£0
(Amount paid by the employee, as a contribution toward the taxable benefit)

equals

£300
£300 is the taxable amount (or Cash Equivalent) to apply to the employee as a benefit.

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