What is Ireland's Small Benefit Exemption Scheme?
The “Small Benefit Exemption Scheme” also known as the “Small Benefit Scheme” allows employers to provide a tax-exempt benefit to Irish employees each year that are not subject to any Benefit-In-Kind (BIK) tax liability – either for the employee or the employer. Through the scheme, employers can now award each employee with up to 1,000 per year across two qualifying benefits, such as gift cards. (This amount was raised from €500 in 2022) The combined value of the two benefits cannot exceed €1,000. Tax-free vouchers or benefits can be used only to purchase goods or services. They cannot be redeemed for cash.
Small Benefit Exemption Rules for Compliance
- Rewards cannot exceed €1000.
Under the Small Benefit Exemption Scheme in Ireland, employers can offer tax-free employee rewards up to a maximum of €1,000 per employee annually. This tax-free allowance offers a flexible way to appreciate your team’s hard work without adding to their tax burden. Employers can choose to provide rewards of any amount under €1,000, tailoring them to individual employees. However, it’s crucial to remember that any reward exceeding the €1,000 threshold per employee will not be eligible for tax-free rewards benefits. In such cases, the entire amount is subject to Benefit-In-Kind (BIK) taxation. - Maximum threshold of 2 awards per employee
The scheme allows for up to two tax-free rewards per employee within a single tax year, which aligns with the calendar year from January 1st to December 31st in Ireland. For instance, if an employer grants a €200 employee tax-free voucher in January and follows up with a €500 reward in July, the employee reaches their Small Benefit Exemption Scheme limit for that year, even if this amount falls under €1000 - Rewards must have no access to cash
A key condition of the Small Benefit Exemption Scheme is that rewards cannot be converted into cash. This means that rewards should not be disbursed through payroll or via a method that allows for cash withdrawal, like a company expense card. The preferred form of reward is through tax-free gift cards in Ireland or vouchers, exclusively redeemable for goods and services, ensuring compliance with the scheme’s regulations. - Reward must be in addition to an employees normal pay.
Rewards under the Small Benefit Exemption Scheme must be in addition to an employee’s regular pay and cannot be part of a salary sacrifice arrangement. This setup requires the employer to cover the cost of the rewards entirely, without deducting any amount from the employee’s salary. This approach not only adheres to the Revenue Small Benefit Exemption guidelines but also reinforces the value of these tax-free rewards as a genuine token of appreciation beyond the standard compensation package.
SWIRL Gift and the Small Benefit Scheme
Our SWIRL Gift cards are compliant with the Revenue Small Benefit Scheme as they cannot be used to withdraw cash from ATMs or cannot be redeemed for cash. Cards can be loaded with amounts up to €1000 and employees can use them to make payments for goods and services online and in stores worldwide
