The Small Benefit Scheme (SBS) 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 year.
As an employer, the Scheme allows you to give certain types of rewards to your employees that are NOT subject to any Benefit-In-Kind (BIK) tax for the employee, or employer tax (Employer PRSI) for the company. To provide tax-free rewards to your employees under the Scheme, you must adhere to 4 basic rules:
1. €520 million
If all Irish employers fully availed of the Small Benefit Scheme, the total annual tax saving would be €520 million!
2. €500 max
The reward 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 any employee receiving more than €500 will not qualify for tax-relief. In fact, rewards over €500 are subject to BIK on the entire amount!
3. You Can Extend the Scheme Year Round
Even though one of the key regulations of the Small Benefit Scheme is that it can only be applied to one reward per employee per year, it is possible for companies to extend the Scheme throughout the year in conjunction with a qualifying points system. This means that you can award points to your employees throughout the year, and allow them to cash-in their points at the end of the year up to maximum of €500 in non cash rewards.
The advantage of course is that instead of a giving a one-off reward for retrospective performance, you can instead run an ongoing, proactive incentive & reward programme throughout the year. This could be a Sales Incentive, Performance Improvement Programme, KPI Incentive, Peer-Recognition, On-the Spot Rewards, Employee of the Month, or Service Awards.
4. Non Cash Rewards Only
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.
5. 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 amount, and needs to pay for the total value of the rewards from the company's own funds.
6. Paying Bonuses Tax-Efficiently
Many companies are now using the Small Benefit Scheme to make their annual bonus more tax-efficient. If an employee's bonus is less than €500, it can be paid entirely tax-free. However, if the bonus is greater than €500, then only €500 may be paid tax-free, with the remainder being paid through payroll, subject to the usual tax and social welfare deductions.
7. The Most Popular Rewards are "Near-Cash"
The Scheme rules only stipulate that the rewards must be in a non-cash format. After that, it is completely up to the company to decide what type of rewards to give. Most companies opt for gift cards or gift vouchers. And while there are thousands of gift card and voucher options, the most popular gift cards among employees are the open-loop Mastercard gift cards – like the Allgo Mastercard – which can be spent in anywhere that accepts Mastercard, even online and abroad. These cards are the nearest thing to cash that still qualifies for the Small Benefit tax relief.
8. No Returns Need to be Made
A great advantage of the Small Benefit Scheme is that it is so straightforward to administer for companies. There is no payroll adjustment or Revenue return to be made to avail of the Scheme. Neither the employer nor the employee need to make any specific return to revenue when using the €500 Irish Revenue Small Benefit employee reward scheme.
Guide to Small Benefit Scheme 2019
Our 2019 Expert Guide to the Irish Revenue’s tax-free employee reward scheme 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.