One of the four key rules of the Small Benefit Scheme is that the tax exemption can only be applied to one reward per year. However, for 2020, this is being waived for frontline or other key workers.
Overview of Small Benefit Scheme
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!
One Voucher Waiver 2020
In recognition of an employee's exceptional efforts during the COVID-19 crisis, employers can award multiple vouchers throughout 2020, all tax-free up a maximum of €500 over the year.
This concession only applies to employees who continue to work during this period. All other conditions must be met, eg the maximum (cumulative) value in the year may still not exceed €500.
Small Benefit Scheme - Facts
if all Irish employers fully availed of the Small Benefit Scheme, the total annual tax saving would be €520 million!
Because only 50% of Irish employers use the Scheme, and on average those that do only avail of about 60% of the €500 limit, the actual annual tax saving is in the region of €120m.
Definition of Frontline Staff
The definition of key workers or frontline staff is quite broad, and includes employees who perform key roles in providing essential services or public services. The Government has published a list of these essential service categories, which include-
- Agriculture and Fishing Manufacturing
- Repair OR Installation of Machinery/Equipment
- Electricity, Gas and Water
- Wholesale and Retail Trade
- Transport Storage and Communication
- Accommodation and Food Services
- Information and Communications
- Financial and Legal Activities
- Professional, Scientific and Technical activities
- Rental and Leasing Activities
- Administrative and Support Services
- Public Administration and Defence
- Human Health and Social Work Activities
- Community/Voluntary Services
Government advice states that if you are providing an essential service, you should identify those employees (including sub-contractors) who are essential to the provision of that service and notify them. This can be done by category of employee or by individual, it could include all employees of the organisation.
If you are unsure if your company or specific roles in your company are deemed essential, it is advisable to seek guidance from one of the business support organisations like IBEC, ISME or the CIPD.
Revenue recommends that "appropriate" documentation be retained by an employer where the multiple voucher concession is availed of.
Guide to Small Benefit Scheme 2020
Our 2020 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.