Tax-free Vouchers – A Double Bonus For Everyone

Who can receive tax-free vouchers?

Under Irish Revenue’s Small Business Exemption Scheme, directors and employees can receive a non-cash bonus of up to €1,000 a year in the form of tax-free vouchers. It’s a tax-efficient way to reward your staff during the year or give a bonus at Christmas.

You are required to follow certain guidelines are followed, neither your company nor your employees will pay PAYE, PRSI, or USC on these vouchers.

This has the potential of saving €1200 in tax per employee.

If you haven’t taken advantage of this tax advantage make sure you do before the end of the calendar year because they can only be claimed once a year.

It is a popular way for companies of all sizes to reward their employees, especially at Christmas time.

 

In this guide, you’ll learn:

• What tax-free vouchers are
• The Small Business Exemption Scheme rules
• How much tax can the company save?
• Different tax-free voucher options

 

What are tax-free vouchers?

It’s not just employees who like to get these tax free vouchers. They are also popular with company directors and their spouses (if the spouses are on the company’s payroll to avail of this scheme.

The scheme is very straightforward with virtually no paperwork involved and no return to revenue required other than the invoice from the purchase of the vouchers.

The invoice is then treated as a fully deductible business expense for accountancy purposes and there is no need to adjust payroll – provided the rules listed below are followed.

Small business exemption scheme rules

 

• • You must purchase with company funds

  Tax-free vouchers must be purchased using the business bank account or credit card. Employees are not allowed to purchase a voucher and then seek reimbursement from the company.

  • Maximum of twice per year

  A maximum of two vouchers can be paid to any single employee in a calendar year. Regardless of how many vouchers are given to an employee a maximum of two and a maximum if €1000 is all that will qualify for tax-free status.

  • Must be non-cash format

  The benefit must be provided in a non-cash format e.g. gift voucher, which cannot be converted into cash thereafter. As the payment must be in a non-cash form, the most common way to avail of this scheme is by purchasing easy=to-use gift vouchers.

  • A salary sacrifice is not allowed

  You cannot fund this businesses exemption scheme from the employees’ wages. As stated above, it has to be invoiced to the company and paid by the company or the company credit/debit card..

  • Recipients must  be on the payroll

  Directors who avail of this scheme need to be on the company’s payroll to qualify.

How much tax can a company save per €500 voucher?

	Small Business Exemption Rules	Normal payroll in order to receive €500 (i.e. after tax)
Gross payment	€500	€1,042
PAYE	0%	@ 40% = €417
PRSI – employee	0%	@ 4% = €42
USC	0%	@ 8% = €83
Total employee tax	€0	€542
Net payment	€500	€500
PRSI – employer tax	0%	@ 10.75% = €112.015

Total tax saved: €654

 

 

 

How can you avail of tax-free vouchers

Employers can use the scheme at any time in the year, as long as the two uses combined do not exceed €1,000.

 Like all purchases for your business, make sure your retain the invoice for the purchase of your vouchers. The invoice will be treated like all other tax-deductible expenses by your accountant.

Tax-deductible expense

You then treat the invoice as a tax-deductible expense. Your accountant will look for these records when doing your tax return. Get in touch if you have any questions.

 

 

Tax-free voucher options

 

Universal gift cards

There are a variety of companies who offer universal gift cards such as One4All, Allgo, and Perx. These companies offer a voucher that can be used in many different stores in Ireland.

Store vouchers

You can choose from a variety of shops, department stores, or supermarkets.

Experience vouchers

Buy Spa treatments, gym memberships, or concert tickets are all good ideas.

 

Book A Free Consultation

Are you looking for professional help? aperio is a Cork-based outsourced accounting and consulting company that can take care of all your needs. We are experts in company formation, bookkeeping, management accounting and financial compliance. We also specialise in financial project work such as grant applications. Book a FREE Consultation today.