The Small Benefit Scheme is a statutory tax relief scheme offered by Irish Revenue that allows employers to provide a tax exempt benefit to Irish employees of up to €500 per employee per year.
The Scheme allows you to give certain rewards to your employees that are NOT subject to Benefit-In-Kind (BIK) tax for the employee, or employer tax (Employer PRSI) for the company. In existence since 2004, the tax-free amount was extended to €500 in October 2015.
To avail of the tax-break, employers must adhere to 4 basic rules:
1. Once per Year
The benefit can only be given once per year in a single award. As the tax year in Ireland is January 1st - December 31st, this means that if an employer makes an award to an employee in January, then the full year’s €500 BIK-relief is used up for that employee, even if the reward is less than the €500 threshold.
The benefit must be in non-cash form that cannot be converted into cash. This means that it cannot be paid through payroll, or for example on any company expense credit card that could be used at an ATM to withdraw cash.
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3. Below the €500 Threshold
The benefit cannot exceed the threshold, which is currently €500 per employee per year. The employer can award a lower amount than €500, or different amounts to different employees, but no employee can receive more than €500 in value.
4. No Salary Sacrifice
The benefit cannot be funded from a deduction in salary from the employee, so the company 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.
Download the Small Benefit Guide 2018
In the latest publication from Allgo, we provide the definitive guide to the Irish Revenue's tax-free reward scheme for Irish employers and employees. Download it for free today by clicking the Download Now button below.