04/07/2023
Available tax exemptions for employee suggestions
Certain suggestion payments made by an employer to a staff member of up to £5,000 can be made free of tax and NIC.
Financial Benefit Awards can be made to staff members who make suggestions that are implemented and result in an improvement of efficiency or effectiveness for the employer. The benefit is the greater of:
- Half of the expected financial benefit gained by the employer in the first year since the scheme was implemented.
- 10% of the anticipated financial benefit the employer will gain in the first five years since introducing the recommendation.
The above is subject to an overriding limit of £5,000 if it is to remain free from tax and NIC.
In addition to the above encouragement awards of up £25 may be awarded tax and NIC free. This covers suggestions that are of ‘intrinsic merit or demonstrates special effort.’
For the above exemptions to apply a number of conditions must be met. This includes; the scheme must be open to all employees, it must relate to activities carried on by the employer and the employee could not have been expected to make the suggestion as part of their normal activities.
For further information on this topic, please contact Joe Wilson on 023 8046 1237.
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