AS another year comes to a close and everyone starts getting into the festive spirit, it’s time to consider the different options to reward your staff for all of their hard work during the year.
Yes, it is almost Christmas bonus time! It is important that any businesses considering giving Christmas bonuses make sure that they are handled in a tax efficient manner.
This will benefit both the employer and the employee as the employee will see more of their bonus while the employer can make some savings, which are always welcome - especially at this time of year.
The Small Benefits Scheme
Under the Small Benefits Scheme, employers can reward company directors and employees with a single non-cash award, such as a voucher or gift, of up to €500 in value, completely tax free each year.
Under this scheme, the employee is not liable to pay PAYE, PRSI or USC on the value of the award and the employer is not liable for employer PRSI. This could result in a potential saving of around €650 in tax.
The tax-free bonus must be paid in non-cash form. A popular choice for many employers is to provide the bonus in the form of vouchers.
Gifting vouchers to employees can also help boost the local economy when employers avail of schemes similar to the Dundalk Chamber of Commerce Shop Local Gift vouchers.
If the bonus exceeds €500 then the full value of the bonus is taxable, not just the amount in excess of the limit.
In order to qualify for the small benefits scheme, only one tax-free bonus may be paid to each employee in any one year. Where more than one bonus is given in a year only the first one will be covered by the Small Benefits Scheme, even if the value is less than the €500 annual allowance. It is also important to note that any unused allowance cannot be carried over.
For example, if an employer awards an employee a voucher worth €250 in January 2017 and makes a second award of a €200 voucher in December 2017 the first award of €250 will be covered by the Small Benefits Scheme, but the second award will be fully liable to PAYE, PRSI and the USC and should be processed through payroll in the month the award is made.
How do you avail of the scheme?
The really good news about the Small Benefits Scheme is that there is no paperwork and no tax return to be made to avail of it.
The employer is invoiced for the total value of tax free vouchers ordered. The invoice is treated as a normal tax deductible business expense for accounting purposes, and there is no need to adjust payroll in any way – provided the above rules are followed.
Employees, company directors and the local economy can all benefit from this scheme. That’s an added bonus for everyone!
For more information contact UHY FDW on 042 933 9955 or email firstname.lastname@example.org. Visit: www.fdw.ie