Would you like a €500 tax free payment from your limited company? No, it’s not a trick question. The good news is that you are entitled to take one each and every year.
So how exactly? Under the Small Benefits Exemption Scheme, company directors and employees can receive a non-cash bonus of up to €500 value on a completely tax free basis each year. As the payment must be in a non-cash form, the most common way to avail of this scheme is by purchasing gift vouchers.
WHAT ARE THE RULES?
The important conditions to be aware of are:
- The gift voucher must be purchased from company funds e.g. from the company bank account or company credit card. The director or employee cannot purchase a voucher themselves and seek reimbursement from the company. This is especially important for private limited company contractors to be aware of.
- A voucher can be purchased for each individual only once per year, even if you do not take take the full €500. For example, you cannot take a voucher of €350 earlier in the year and take a further €150 later in the year. The scheme allows for one voucher per year up to the value of €500. Therefore to maximise the tax relief available, you should take the full €500 voucher.
- You can avail of the scheme once each year, so put a reminder in your calendar to make sure you don’t forget to claim next year too!
HOW MUCH TAX WILL I SAVE?
A higher rate tax payer, will save up to €520 in tax by availing of this scheme.
If you a standard rate tax payer, your tax savings will be less.
The gift voucher is also a fully deductible business expense for your company.
If you haven’t availed of the Small Benefit Exemption Scheme so far in 2016, make sure you do before 31 December!