In a word, the answer is NO! Neither the employer nor the employee need to make any specific return to revenue when using this Irish Revenue tax-free reward scheme.
A great advantage of the Small Benefit Scheme is that it is very straightforward to administer from the Irish Revenue point of view. For comprehensive information, download our Definitive Guide to the Small Benefit Scheme.
Irish Revenue only stipulates that if the 4 Key Rules are adhered to, then any company can “give employees a small benefit of up to €500 in value, tax free, each year.”
The 4 Scheme Rules are-
- Non-Cash Format
- Salary Sacrifice is not allowed
- Any value below €500
- One Reward / 1st Reward per Year
Normally, Irish companies order gift voucher or gifts cards from trusted suppliers which can be redeemed for goods and services and not for cash (such as Allgo's approved tax-free gift vouchers).
As the benefit cannot be funded from salary sacrifice on behalf of the employee, the employer needs to be invoiced for the total benefit amount, and needs to pay for the total value of the rewards from the company's own funds. This invoice is treated as a normal business overhead for accounting purposes, and there is no need to adjust payroll in any way. In fact, there is no requirement to record the reward that each employee receives.
As long as the company can show a purchase invoice for non-monetary rewards for a total that is less than €500 x total number of staff employed on that date, then Rules 1-3 above are fully complied with.
The 4th rule complicates things slightly, because it relates to the question of whether an employee receives more than 1 reward in any given year (even if the total of all the rewards received is less than €500). As only the 1st reward each employee receives every year qualifies for Small Benefit relief, if a company wishes to reward the same staff more than once, they need to ensure that either-
- The 2nd and subsequent rewards are accounted for in payroll (normally by grossing up the reward value so that the company and not the rewarded employee pays the tax), or that
- A revenue-approved reward system is used to allow multiple rewards throughout the year that can only be redeemed by employees at years end (for example, see Allgo Points).
In summary, while NO RETURNS and NO PAYROLL adjustments need me made on a correctly administered Small Benefit Scheme, it is recommended that companies record the payouts made on reward programmes, and internally check that the combined rewards made adhere to the scheme rules each year, so that this documentation can be shown to Irish Revenue for any possible future company audit. Read more of our expert blogs on the €500 Small Benefit Scheme
Tax-Saving on Small Benefit Exemption Scheme
With up to €500 per employee tax-free, the Small Benefit Scheme is increasingly popular among Irish companies of all sizes. Since 2015, when the tax-free limit was doubled from €250 to €500, more and more companies have started paying bonuses and other non-salary rewards through the scheme - not surprising when you see the savings involved.
For more about the Small Benefit Scheme, download our definitive guide -