We have just published our 7th edition of the Expert Guide to the Small Benefit Scheme with all of the newest updates from the Budget, including Enhanced Revenue Reporting.
As of last year, Irish employees became eligible to receive two rewards with a combined value of up to €1,000, all tax-free thanks to the Small Benefit Scheme update in the 2023 Budget. Unlike the prior year’s budget, which saw the Small Benefit annual threshold rise from €500 to €1,000, the Budget for 2024 remained largely unchanged in terms of significant modifications to the scheme. However, there’s one prominent change for Tax-Free rewards in 2024: Enhanced Revenue Reporting.
Up to the end of 2023, there are no payroll adjustments required or Revenue returns to be made to avail of the Scheme. Employers are simply invoiced by the reward provider for the total value of tax-free rewards. This invoice is treated as a normal business overhead for accounting purposes, and there is no need to adjust payroll calculations in any way.
Similarly, employees receiving rewards under the Scheme do not need to make any additional Revenue returns or even include it in any normal return. From 1st January 2024, the details for every Small Benefit Scheme awards will need to be submitted to Revenue as part of the new Enhanced Revenue Reporting (ERR) rules. Although the ERR will not come into effect until January 2024, the Small Benefit Scheme rules must be adhered to for rewards in 2023 or 2024 to qualify as a Tax-Free rewards.
Small Benefit Scheme Rules 2024
To provide tax-free rewards to your employees under the Scheme, you must adhere to 4 basic rules:
Rule 1: Maximum €1,000: The reward cannot exceed the threshold, which is currently €1,000 per employee per year.
The employer can award a lower amount than €1,000, or different amounts to different employees, but any employee receiving more than €1,000 will not qualify for tax-relief.
Rule 2: Max 2 Rewards per Year: The benefit can only be given as a maximum of two rewards in any year, up to a combined total of €1,000. As the tax year in Ireland runs from January 1st to December 31st, this means that if an employer makes a €200 award to an employee in January, and a €500 award in July, then that employee’s full Small Benefit is used up for the year.
Rule 3: No Cash: The benefit cannot be in a form that is, or that can easily be converted into, cash. This means that it cannot be paid through payroll, or for example via a company expense card that could be used at an ATM to withdraw cash. It is most commonly provided in the form of voucher or gift card that can only be used to purchase goods or services.
Rule 4: No Salary Sacrifice: The benefit cannot form part of a salary sacrifice arrangement, defined as “any arrangement under which an employee forgoes the right to receive any part of his or her remuneration due under his or her terms or contract of employment and in return his or her employer agrees to provide him or her with a qualifying incentive.” So essentially, the company needs to be invoiced for the total amount, and needs to pay for the rewards from the company’s own funds, with no reduction in employees’ pay.
Tax Savings:
As long as the Scheme rules are met, the employee is not liable for PAYE, PRSI or USC on the value of the award AND the employer is not liable for employer PRSI on the value of the reward, saving tax of up to €633 per employee! The exact tax saving depends on both the amount awarded (remember, it can be up to €1,000 not necessarily €1,000), and the marginal tax rate that each employee is on.
As ERR does not come into effect until January 2024, any rewards in accordance with the Small Benefit Scheme in 2023 will not be effected by ERR. So if you are looking into awarding employees a tax-free rewards this year, the AllGo Mastercard Gift Card is The Ultimate Gift Card for employee rewards!
The AllGo Mastercard Gift Card is the use-anywhere gift card that gives you the ultimate freedom to choose where you spend – instore, online and even abroad. And it can be bought by companies for their Irish employees completely tax-free up to €1,000 on the Small Benefit Scheme.
