Revenue’s Tax-Allowance for Long Service Awards

September 11th, 2014
Ann Lyons by Ann Lyons

Revenue commissioners consider long service to start at 20 years of service – and so offer tax relief on long service awards. Companies are generally aware of the small benefit tax relief available to employees. This annual tax allowance applies to gifts or vouchers up to the value of €250. The tax relief on long service awards is separate and in addition to the small benefit tax relief.

Employees with long service are allowed tax free tangible gifts up to a maximum of €50 for each year of service, starting at 20 years of service and every 5 years thereafter.

20 years = up to €1000

25 years = up to €1250

30 years = up to €1500

35 years = up to €1750

Let's take the example of an employee with 20 years of service: As with all employees they are allowed one small benefit per year up to the value of €250, however, you can also make a tax free award in recognition of their 20 years of service up to the value of €1000, if the award takes the form of a tangible gift/s. The same treatment does not apply to long service awards made in the form of cash, vouchers or bonds.

The Revenue website addresses this issue:

"Where awards are made to directors or other employees as testimonials to mark long service, such awards are normally taxable. Where, however, an award takes the form of tangible articles of reasonable cost, tax should not be charged provided that:

  1. The cost to the employer does not exceed a certain level for each year of service with effect from 1 January 2002, an article may be taken to be of reasonable cost for the purpose of this concession where the cost to the employer does not exceed €50 for each year of service.
  2. The award is in respect of a period of service of not less than 20 years
  3. No similar award has been made to the recipient within the previous 5 years "

FAQ: "Definition of 'tangible articles' in regard to long service awards: Tangible articles refer to awards given in the form other than vouchers, bonds or cash for example a gold watch – 27/05/2013)" www.revenue.ie

The long and short is …long service awards must be tangible to be tax free!

Regards,

Ann Lyons

 

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