It’s coming close to the end of what has been another difficult year for most businesses, and for employers the lead up to Christmas will be particularly busy managing annual leave, holiday pay and Christmas Bonuses on top of the normal weekly workload.
Vouchers Provided to Employees
A Christmas bonus can put a smile on every employee’s face and can be the perfect way to say “thank you” for the hard work done during a challenging year.
Under Revenue’s Small Business Exemption Scheme, employers can give all employees (including Directors) a small non cash benefit of up to €500 in value, tax free, each year.
With this tax free benefit, you have the potential to save up €656* in tax per employee as the total cost of a bonus of €500 net paid through payroll is €1,156.
*based on employees paying tax at the top rate
There are certain guidelines that must be followed:
- This benefit must not be in cash;
- If more than one benefit is given in a year, only the first one qualifies for tax free status;
- Unused allowance amounts cannot be carried over;
- Tax-free vouchers or benefits can be used only to purchase goods or services. They cannot be redeemed for cash;
- The tax-free vouchers must be purchased from the business bank account or credit card;
- The rewards must be invoiced and paid external to payroll. Employees or directors cannot purchase a voucher themselves and seek reimbursement for it;
- If a benefit exceeds €500 in value, the full value of that benefit is subject to tax.
In order to qualify for the small benefit exemption, it is important that gift cards are not given to employees as a salary sacrifice. This means you cannot fund the bonus from a deduction of your employee’s salary.
Further Revenue guidance on the small gift exemption can be found here.
If you have any questions about the Small Benefit Exemption, please get in touch with our team by email: firstname.lastname@example.org; or phone: 021 486 1486.