The small benefit exemption can allow an employee to receive a voucher or non-cash benefit without giving rise to a charge to tax where certain conditions are met.
Where all of the above conditions have been satisfied, the voucher or benefit will be a qualifying incentive and will be eligible for the small benefit exemption, meaning no tax is payable on the receipt of the voucher or benefit by the employee.
Where more than two benefits are given in a year, only the first two may qualify for the tax exemption (provided all other conditions are satisfied).
Employer A provides a Christmas gift each year to all staff. These gifts have a value no greater than €1,000 and are never in the form of cash. Employer A provides no other vouchers or gifts at any time during the year to its staff.
Employer A must determine before it provides the small benefit whether that ‘payment’ is a taxable payment, and it is to be reported through payroll.
Employer A is satisfied that the gift meets the conditions of the small benefit exemption and is a non-taxable payment. Employer A is now required to report this payment to all staff in an ERR submission either at the time they are being given to staff or in advance.
Anne works for a large multinational. Each year she receives two €500 vouchers from her employer. She receives these in June and December each year on the 20th of the month. She does not receive any other non-cash benefits from her employer.
Before Anne's employer provides the voucher, they must satisfy themselves that it meets the conditions for the small benefit exemption and therefore can be given as a non-taxable payment.
Anne's employer must report to Revenue on or before 20 June, the date the voucher is to be given to Anne, and again on or before 20 December, the date the second voucher is to be given to Anne. This must be reported through an ERR submission in both cases.
The detail that they must provide to Revenue is the date the vouchers issue to Anne and the value of the vouchers.
Employer B provides Easter eggs every year in April to all its employees. Employer B also provides three €50 vouchers in January, June and November each year to all its employees.
Employer B must determine before it provides any small benefit to its employees whether that payment is a taxable payment.
If Employer B is satisfied that the benefit meets the conditions for the small benefit exemption, it is not taxable, but it must be reported in an ERR submission with the date of payment and the value of the benefit received.
One of the conditions of the small benefit exemption is that it is only the first and second provision of such a gift, with a maximum value of no greater than €1,000, that are to be deemed as small benefits and subject to the exemption.
In this instance the provision of the voucher in January and the Easter egg in April will constitute small benefits for which the conditions for tax-exempt treatment will apply. As with the other examples, the voucher in January must be reported on or before it is provided to the employee and the value of the Easter egg must be reported on or before it is provided to the employee in April.
The vouchers in June and November are taxable, as they are the third and fourth incentives given in the year and must be taxed in the normal way through the PAYE system.
Further information is available in the Revenue Tax & Duty Manual.
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