Generally, where an employer provides a voucher or other incentive to an employee, it is subject to payroll tax. However, tax legislation provides that a voucher or incentive may be given to an employee without giving rise to a charge to tax where certain conditions are met. There has been a significant update to the small benefit exemption scheme included in the 2022 finance bill as follows:
- the aggregate value of vouchers or benefits cannot exceed €1,000 in value (previously €500),
- the combined number of such benefits that can be given in a tax year is two (previously one),
- the voucher or benefit cannot be part of any salary sacrifice arrangement between the employee and employer, and
- the voucher or benefit can only be used to purchase goods or services and cannot be exchanged in part or in full for cash.
The increase in value of the exemption is very welcome and provides a tax efficient opportunity to reward staff for their hard work during the year.