If you’re a business owner looking to reward one of your employees for long service there are a number of tax incentives and obligations you must consider.
Rewarding employees with cash gifts is taxable
By rewarding your clients with cash the gift will be subject to tax. The HMRC does however allow certain gifts to make in recognition of long service, subject to some conditions. These conditions include:
· Must be for 20 or more years of service
· Is not cash or vouchers that can be converted into cash
· Does not cost employer more than £50 for each year of service
· Where more than one long-service gift is made to the same employee the exemption can only apply if there has been at least 10 years between each gift.
If you would like to provide your employee with a gift of monetary value
One way to give your employee a gift of monetary value without actually doing so is letting them choose something they would usually buy- such as a season ticket to a football team.
Trivial Benefits Exemption
If you have chosen a gift for your employee but want to add further monetary value, you could consider using the trivial benefits exemption. The exemption is restricted to non-cash awards, and a maximum of £50. However, it can be applied more than once. Therefore you could, for instance, buy an employee vouchers redeemable at a restaurant each month.
Given that the employee has worked for you for over 20 years, it is likely that your employee is approaching or over 55. This means that you could consider making a pension contribution, of which 25% would be tax free when accessed. If they are over 55 the contribution can be accessed immediately. Therefore by making a contribution of £4000 to their pension £1000 will be tax-free.
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