PAYE Tax-Free vouchers

I

ivorystraws

Registered User
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Hi,

Can someone confirm whether the tax-free vouchers that employers can provide to their employees still exist? If they do, does each one still total 250 euro in any given tax year?

The reason I ask is that I'm wondering how appropriate it is to ask my employer to process part of my monthly pay through that voucher to minimise the amount of tax I pay. What do people think and what is the best approach to take when doing this? Does the employer have any obligation to do this i.e. will it incur any major admin challenges for the payroll admin?

Thanks.
 
The benefit is for one voucher only. It's not a question of keeping under the €250 limit in any one year. So taking part of your monthly pay in vouchers will not get the result you desire.

From Revenue FAQ:
If an employer gives each employee one single €250 voucher in the year, the value of the voucher can be disregarded for PAYE/PRSI purposes. If the employer gives two vouchers worth €100 each, the value of the first voucher may be disregarded but the value of the second voucher has to be included as notional pay for PAYE/PRSI purposes. If the employer gives one voucher for €350, the value of that voucher (the entire €350) must be taken as notional pay
 
Gervan said:
The benefit is for one voucher only. It's not a question of keeping under the €250 limit in any one year. So taking part of your monthly pay in vouchers will not get the result you desire.

From Revenue FAQ:
If an employer gives each employee one single €250 voucher in the year, the value of the voucher can be disregarded for PAYE/PRSI purposes. If the employer gives two vouchers worth €100 each, the value of the first voucher may be disregarded but the value of the second voucher has to be included as notional pay for PAYE/PRSI purposes. If the employer gives one voucher for €350, the value of that voucher (the entire €350) must be taken as notional pay
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Thanks for clarifying that it's only for one voucher. That's understandable but I don't quite understand as I know that if an employer pays a "Bonus" of 250.00 euro by Gift Card/Voucher, there's no PAYE payable, no PRSI payable, it's zero cost to employers (in terms of PRSI) so the net Benefit to employee is 250 euro and the net cost to employers is 250 euro.

So does it have to be a "bonus" or why can't part of the pay just be deemed a bonus and made payable via voucher to the employee therefore saving them 56%!
 
ivorystraws said:
Thanks for clarifying that it's only for one voucher. That's understandable but I don't quite understand as I know that if an employer pays a "Bonus" of 250.00 euro by Gift Card/Voucher, there's no PAYE payable, no PRSI payable, it's zero cost to employers (in terms of PRSI) so the net Benefit to employee is 250 euro and the net cost to employers is 250 euro.

So does it have to be a "bonus" or why can't part of the pay just be deemed a bonus and made payable via voucher to the employee therefore saving them 56%!
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Well you've pretty much answered your own question there - the whole point of "pay" (or emoluments as it is known in the tax legislation) is that it is taxable income.

A bonus is something different from pay (for example the employer may not be obliged to pay it), but will be taxed the same way as ordinary pay, except in the limited circumstances outlined above.
 
mandelbrot said:
Well you've pretty much answered your own question there - the whole point of "pay" (or emoluments as it is known in the tax legislation) is that it is taxable income.

A bonus is something different from pay (for example the employer may not be obliged to pay it), but will be taxed the same way as ordinary pay, except in the limited circumstances outlined above.
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Yes thanks. So is it a simple matter of deducting the "bonus amount" from the normal pay and specifying it as a 250.00 euro bonus payable by Gift Card/Voucher? That's why I asked the question in the beginning as to what is the best approach to take when doing this and/or if anyone has done this before?
 
ivorystraws said:
Yes thanks. So is it a simple matter of deducting the "bonus amount" from the normal pay and specifying it as a 250.00 euro bonus payable by Gift Card/Voucher? That's why I asked the question in the beginning as to what is the best approach to take when doing this and/or if anyone has done this before?
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In a word, No.

It's not simple, for a number of reasons. Your pay is a statutory entitlement (i.e. the minimum wage legislation), and also a contractual entitlement (i.e. you should have a contract stipulating that you get paid X amount per hour / per annum etc...).

So you can't be paid (say) €500 a week all year round, and then in one particular week, be paid €250 for the same work, along with a voucher for €250.

That is classic tax avoidance, and known as wage substitution. It used to be relatively common in some jobs, whereby people would have a very low salary / wage, which would be augmented by tax-free "expenses". The reality in such a case is that the €250 is IN FACT, pay; it doesn't matter what you and your employer have chosen to call it.

So, if your employer knows and understands their obligations, they'd never agree to what you are proposing, and even if they did agree to reduce your salary by the necessary €250, they would be perfectly entitled to turn around and tell you they've decided not to pay you a bonus...! :D

So just forget about it, this area doesn't have any shades of grey for you to mess around with.
 
I think the regular pay would be reduced by 5 Euro a week, and a single 250 voucher topup given once during the year. That makes it look more like a bonus and less like wage substitution.

Still not worth the hassle from the employers point of view.
 
mandelbrot said:
In a word, No.

It's not simple, for a number of reasons. Your pay is a statutory entitlement (i.e. the minimum wage legislation), and also a contractual entitlement (i.e. you should have a contract stipulating that you get paid X amount per hour / per annum etc...).

So you can't be paid (say) €500 a week all year round, and then in one particular week, be paid €250 for the same work, along with a voucher for €250.

That is classic tax avoidance, and known as wage substitution. It used to be relatively common in some jobs, whereby people would have a very low salary / wage, which would be augmented by tax-free "expenses". The reality in such a case is that the €250 is IN FACT, pay; it doesn't matter what you and your employer have chosen to call it.

So, if your employer knows and understands their obligations, they'd never agree to what you are proposing, and even if they did agree to reduce your salary by the necessary €250, they would be perfectly entitled to turn around and tell you they've decided not to pay you a bonus...! :D

So just forget about it, this area doesn't have any shades of grey for you to mess around with.
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Thanks for the clarification and it does seem from what you've said that it definitely isn't worthwhile proposing it. Plus the fact that the outcome is vouchers applicable to specific products/services only available in certain shops makes me all the more hesitant to opt for it. I've gotten more than my fair share of tax-free bonuses from my employer to date :D
 
JoeBallantin said:
I think the regular pay would be reduced by 5 Euro a week, and a single 250 voucher topup given once during the year. That makes it look more like a bonus and less like wage substitution.

Still not worth the hassle from the employers point of view.
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Yea, thanks for the proposal and it does seem pointless plus I'd want that in writing if my employer did agree to the proposal, which I don't think they would accept.
 
Gervan said:
Would a proprietary director also be allowed this €250 tax-free bonus?
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I asked this at a CPD on Friday, the answer I was given was yes, however the director would still be obliged to report this income on their tax return.

The exemption seemingly is on the employer not on the employee.
 
Hi sorry to open up an old post but i dont understand the above post. If a director has to report it on tax return is tax paid on it or is it declared as tax free income
 
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