What are the odds?

My client tells me that he has recently instituted an ‘incentive scheme’ for his employees and I am now wondering about the PAYE implications. Basically the employees have work targets for each week.

If they meet the targets for the week their names are entered into a draw and the prizes are £10 vouchers for a selection of stores. They can choose which store they would like the voucher for.

Apparently the chances of winning a prize are about one in four.

As there is only a chance of winning is this amount taxable and how should it be dealt with under the PAYE system? Should income tax and National Insurance contributions be paid or should it be shown on a P11D or are there any other possibilities?

I am also wondering whether the fact that vouchers are used as prizes has any bearing. If these amounts...