Irish employers are foregoing €400m in tax-savings by not using the Small Benefit Scheme to its full potential!
The Small Benefit Scheme allows Irish employers to provide a tax exempt reward for employees of up to €500 per year. As long as the rewards given are-
1) a maximum of €500
2) only one reward per employee per year
3) not paid in cash or by payroll, and
4) not part of any salary sacrifice arrangement
then these rewards are NOT subject to any Benefit-In-Kind (BIK) tax liability – either for the employee or for the employer. This can save up to €657 per employee in Employee Income Tax, PRSI and USC, and Employer PRSI!
€590m Potential Tax Saving!
If all Irish employers fully availed of the Small Benefit Scheme, the total annual tax saving would be €590 million!
However, in our HR Trends Survey 2021 only 56% of Irish employers reported using the Scheme. This figure was also supported by a poll we carried out on LinkedIn just last week.
In addition, even though the maximum that an employer can reward tax-free is €500 per employee per year, many companies award less. In fact, the average reward made by Irish companies who used the Scheme last year was only €302 per employee.
So the total actual annual tax saving on the scheme is only €190 million!
Small Benefit Scheme - Guide
Get the Expert Guide to the Irish Revenue's tax-free reward scheme for Irish employers and employees.
- Small Benefit Rules
- Tax Savings Calculations
- Best Gift Cards for your Staff
- Paying Bonuses Tax-Free
- Extending the Scheme Year Round
With tax savings per employee varying from €254 for those on the lower tax rate to €657 for those on the higher rate, the total tax savings in any company will depend on the salaries paid and the number of staff.
The tax-savings below are the calculations based on awarding €500 per employee under the Scheme to employees on different annual salaries, with normal allowances and tax credits.
The tax-savings per company size below are the calculations based on awarding €500 per employee under the Small Benefit Scheme to employees earning €36,000 per year with normal allowances and tax credits. tax rate.
Guide to Small Benefit Scheme 5th Edition
The 5th edition of the Small Benefit Scheme Guide gives you expert info, insights and case studies for getting the most out of the scheme. Download it for free today by clicking the Download Now.