From providing tax-free rewards to hundreds of companies large and small, here are the top 10 questions we get asked about the €500 Small Benefit Scheme
Do part-time employees qualify for the full threshold of the Small Benefit Scheme?
A: Yes. No distinction is made in the legislation between full and part-time employees, so as long as the person is an employee of the company, they can avail of the full €500 threshold regardless of the number of hours they work.
Do contractors qualify for the full threshold of the Small Benefit Scheme?
A: If a contractor is paid through the client company’s payroll, then they can avail of the scheme through the client company or as a self-employed worker (but not both!). If they invoice for their services, they can avail of the scheme by awarding themselves as a self-employed worker.
Can employers use the Small Benefit Scheme to pay bonuses?
A: Yes up to the €500 threshold - only normal salary sacrifice is not allowed. Many employers use the scheme to pay the first €500 of any yearly bonus tax-free.
Can company directors and proprietary directors avail of the Small Benefit Scheme?
A: Yes, as long as they are paying income tax, PRSI and USC. As proprietary directors are classified as self-employed, and there is no employer PRSI for self-employed workers, the overall tax-saving may be 10.75% less than for non-proprietary company directors.
Can self-employed workers avail of the Small Benefit Scheme?
A: Yes, as long as they are paying income tax, PRSI and USC. As there is no employer PRSI for self-employed workers, the overall tax-saving may be 10.75% less than for employed workers.
If a company offers employees a discount on their own goods and services, can they still use the Scheme?
A: Yes, as long as in relation to the discounted goods or services-
1. the amount paid by the employee is equal to or more than the cost to the company, and
2. the discounted goods cannot easily be changed into money.
If a company offers employee a Long Service award, can they still avail of the Scheme?
A: Yes, as long as-
1. the long service award is made to mark long service of not less than 20 years,
2. the long award is a tangible item (that is, not vouchers, bonds or cash),
3. the cost is not more than €50 for each year of service,
4. no similar long service award has been made to the employee within the previous five years.
As an employer, do I need to make a return to Revenue for the Small Benefit Scheme?
A: No. If audited, it is sufficient to show than the total cost of the Small Benefit Scheme is the same or less than the no. of employees at the time divided by €500.
What happens if a company wants to give rewards twice a year?
A: Only the 1st reward will qualify for the Small Benefit Scheme. eg The employer awards a voucher of €250 in January to an employee, and then another €250 to the same employee in July. The 1st €250 voucher is tax-free, however full BIK must be paid on the 2nd voucher. €250 should be processed through payroll in July with the relevant withholding taxes applied.
What happens if a company gives an employee a single reward that is over €500?
A: The entire reward is subject to BIK. eg The employer awards an employee a voucher worth €575 in December. It is the first award/gift the employee has received from the employer that year. Because the benefit exceeds €500 in value the full value of that benefit is subject to PAYE, PRSI and the USC. The value of the voucher (€575) should be processed through the December payroll and the relevant withholding taxes applied.
For more about the Small Benefit Scheme, download our definitive guide -