The value of a non-cash voucher for tax and National Insurance purposes is generally the cost to the employer but it can include other associated costs such as costs of selecting the store or other “after sales” expenses.
In your case, £40 will be the value to use. You will need to include this as earnings for Class 1 National Insurance purposes in the pay period in which the employees receive the vouchers- not when you pay for them. You will then also need to include the cost of the vouchers on forms P9D or P11D for tax purposes.
It is best practice to forewarn your employees of the tax and National Insurance liability arising on their gifts.
Alternatively, you can pay for their tax liabilities using a PAYE Settlement Agreement (PSA). This would also avoid the need to declare the vouchers on forms P9D or P11D.
If you would like to discuss your staff gifts further, please feel free to contact your local TaxAssist Accountant.
By Jo Nockels
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.