Tuesday 27 September 2016

Workers can now get Christmas gift of up to €500 tax-free from employers

Published 20/11/2015 | 17:33

Photo: Getty Images/iStockphoto
Photo: Getty Images/iStockphoto

Workers will be able to get a gift of up to €500 tax free from their employers this Christmas.

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Finance Minister Michael Noonan confirmed that the amount that employers can give to their staff as a non-cash gift has now doubled to €500.

The change has been backdated to the day the Finance Bill was published on October 22 last.

It is understood that the upturn in the economy means that large numbers of employers are to give non-cash gifts to their employees this Christmas as a bonus. The benefit is usually in form of a voucher or gift card.

Known as the small-gift exemption, the measure allows for non-cash rewards to be make without the employee being liable for income tax, pay related social insurance (PRSI), universal social charge and benefit-in-kind tax.

However, the benefit cannot go over €500 in value, and must not be in the form of cash.

And the gift cannot be exchanged for cash, in part or in full.

It cannot be part of any pay cut arraignment between and employee and employer. Only one benefit or voucher per employee can be given in a year.

Mr Noonan said: “In my Finance Bill speech I announced that an employer may provide an employee with a single annual non-cash benefit to a maximum of €500 without applying PAYE, PRSI and USC to that benefit.”

He said he had now brought forward a Committee Stage Amendment that now allows the measure to apply from date of publication of the Finance Bill, on October 22 last.

“I have been informed by the Revenue Commissioners that this change is now being applied on an administrative basis pending the enactment of the Finance Bill. The amendment also ensures the exemption covers either a voucher or a small non cash benefit,” the minister added.

The change is expected to be a huge boost to retailers and to the gift voucher industry. Some €600m is spent on vouchers every year, according to industry experts.

The big winner is expected to be An Post, which is the majority owner of the One4All gift card brand. These vouchers can be exchanged in 7,5000 retail outlets.

In the last few weeks retailers have launched their own gift voucher scheme, known as FromMe2You. The members of Retail Ireland, who are behind the new voucher card scheme, pay less commission for redeeming these cards than is the case with One4All.

Chief executive of One4All Michael Dawson said the minister’s change would increase tax revenues.

“This change will be Exchequer neutral at worst, and more likely provide a boost to the Government coffers through increased value added tax on retail sales.”

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