Surprise your employees this Christmas using the small benefits tax-relief

October 29th, 2014
Ann Lyons by Ann Lyons

tax-free

Many companies use the small benefits tax-relief at Christmas time to thank employees for their hard-work throughout the year. My brother received a €250 voucher from work last Christmas – he gave the voucher to his wife as her Christmas gift. I considered that to be a generous gift but my sister-in-law was unimpressed by the lack of thought. She then told me that she ended up using the voucher towards paying for a new washing machine! 

While I can understand how that scenario can easily happen in a busy household, it did make me think that a tangible gift would have been more appropriate. The nice thing about gift-giving is that you can give something that the recipient may not buy for themselves. It is difficult to justify treating yourself when bills need to be paid or household items need to be replaced. It is a pleasant surprise to receive a gift and tangible gifts continue to remind the recipient of your goodwill.

Companies should consider the best use of the small benefits tax-relief and the various options available. While the benefit is tax-free, it can still represent a significant cost to companies and it needs to be considered like any other investment. Companies should note that tangible gifts also avail of the small benefits tax-relief. Tangible gifts are non-monetary, therefore the emphasis is on the gesture rather than the value of the gift.

Revenue states that where an employer provides an employee with a small benefit (that is, a benefit with a value not exceeding €250) PAYE, PRSI and Levies need not be applied to that benefit. The taxable value of the small benefit can be ignored completely for payroll purposes. The small benefits relief only applies to non-cash benefits and only one such benefit may be given during the year.

Avail of the Small Benefit Tax-Relief

Cash Payment

€250.00  

Gift Option

€250.00  
PAYE (41%) Higher Rate €213.54 PAYE (41%) Higher Rate €0.00
Employees PRSI (4%) €20.83 Employees PRSI (4%) €0.00
USC (7%) €36.46 USC (7%) €0.00
Employers PRSI (10.75%) €55.99 Employers PRSI (10.75%) €0.00
Total cost to the employer €576.82 Total cost to the employer €250.00

If you would like more information on the small benefits tax-relief and the various options available, please feel free to contact me.

Regards,

Ann Lyons

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