Would you like €500 tax free?

26 November 2019

Under the Small Business Exemption Scheme, directors and employees are eligible to receive a non-cash bonus of up to €500. In 2016 we saw the threshold double from €250 to €500.

There is no paperwork involved and no return to be made to avail of the scheme. Companies or sole traders are simply invoiced for the total value of tax-free vouchers ordered. The invoice is treated as a fully deductible business expense as long as the following rules are met:

The vouchers must be paid for from the business bank account.Directors or employees cannot purchase a voucher themselves and seek reimbursement from the company.

Only one tax-free voucher can be paid to an individual in any one year, even if you do not avail of the maximum annual allowance of €500.

The benefit must be provided in a non-cash format.

Salary sacrifice is not permitted. You cannot fund the scheme from a deduction from your employee’s salary. You must get invoiced for the rewards and pay this external to payroll.

The scheme allows both the employer and the employee to save tax. For example, a higher rate taxpayer paying 40% PAYE will save up to €542 in tax by availing of this scheme. In order for the taxpayer to obtain this cash, they require a gross salary of €1,042. The difference of €542 is a combination of PAYE, USC and PRSI which would be deducted if you received this amount in a salary.

Tax-free vouchers are an efficient way to reward your staff during the year or with a bonus this Christmas. Provided certain guidelines are followed, neither your company nor your employees will pay PAYE, PRSI or USC, potentially saving a total of €653.65 in tax per employee. If you have not availed of the Small Benefit Exemption Scheme so far in 2019, make sure you do before 31st December!

If you are going to avail of the scheme, it is possible to support local jobs and local businesses by purchasing Shop LK vouchers which are accepted in over 200 outlets in Letterkenny. Shop LK vouchers can be purchased online at https://www.shoplk.ie/, at Letterkenny Chamber of Commerce Monday to Friday 9am to 5pm and at the Courtyard Shopping Centre during normal working hours.

Jacinta Clerkin QFA FLIA is a Qualified Financial Advisor, Fellow of the Life Insurance Association and Retirement Planning Advisor. You can contact her through John F. Loughrey Financial Services by telephone on 074-9124002 or by email on jacinta@jfl.ie.

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