XMAS Bonus: what is the best way to do this?

J

johnnyv

Guest
Hello,

I will be giving my employees a small XMAS bonus this year (around the €250 AFTER tax mark.)

Is it cheaper for me and for the employee (tax wise) if I buy them a gift (vouchers, ipod...) or if I give them $$?

Opinions appreciated.

Thanks.
 
On checking the same area recently I have found that €100 can be given tax free (has to be voucher/non-cash) under the small benefits exemption.

Any other benefits in cash or otherwise have to be put through the payroll and taxed (paye/prsi).
 
On checking the same area recently I have found that €100 can be given tax free (has to be voucher/non-cash) under the small benefits exemption.

For what it's worth the small benefit tax/PRSI exemption threshold was raised from €100 to €250 by [broken link removed] albeit from January 2005. Perhaps you could defer the bonus until then to avail of this?
 
I was surprised to hear this. It was covered on Radio 1.

One thing isn't clear, can a Proprietay Director give himself a €250 christmas gift tax free???

If so it's basically a tax credit isn't it???
Not quite the €1270 Employee Credit, but a nice
consolation prize.

Looks like I could be having Turkey for christmas after all.

-Rd
 
"Looks like I could be having Turkey for christmas after all"

At least it sounds a lot more appetising that anything here ;)
 
One thing isn't clear, can a Proprietay Director give himself a €250 christmas gift tax free???
Click to expand...

If you try this, be very very careful to ensure that you are not breaching the Companies Acts with regard to prohibited loans to directors and thus storing up possible problems for yourself with the ODCE.
 
Director's Bonus

Yes, that's what I'm worried about. Clearly there is a distinction between Employees and Directors, even if both work for the company. The Employee Credit shows that. But does the distinction extend to this???

I'll check it with the Accountant, but it's one of those things where one accountant might say yes and another might say no.

I suppose a call to revenue is in order.

-Rd
 
Re: Director's Bonus

Your accountant's advice (providing it is based on logic and a good underlying knowledge of tax principles) is far more likely to be of use to you than anything the Revenue tell you. The Revenue are not in the business of dispensing advice and will accept no responsibility for any incorrect or misleading information they give you. If you base your actions on appropriate professional advice, then at least you have some excuse if you run into problems with the OCDE.
 
Re: Director's Bonus

The Revenue are not in the business of dispensing advice and will accept no responsibility for any incorrect or misleading information they give you.
Click to expand...

True, and I will go with whatever advice I get from the Accountant, but it does strike me as Odd that no-one in Revenue would be able to tell me if they'd expect tax to be paid on such a gift. They are after all the ones who collect the tax.

My mail has just been forwarded from someone in revenue to someone else in revenue, so hopefully that's progress. To be fair to them I've always found them to be quite good at answering this kind of question.

-Rd
 
Xmas Vouchers

I mentioned this in a previous thread before but last year I received 1000 euros of vouchers as a xmas bonus. I did not pay any paye on this and the vouchers were handed over in 25 euro segments, ie 40 of them. Is there anyway this was above board? I know the current threshold is 100 euros moving to 250 on Jan 1st but as I currently work for the company it would not be wise to approach Revenue on this. Any thoughts?
 
Small Gifts

Just Got This From Revenue.

To whom it concerns,

The small benefits exemption includes all employees i.e. employees ,directors & proprietory directors can avail of the small benefits exemption.
Click to expand...

So Good News Then.

-Rd
 
Re: Xmas Vouchers

InfoSeeker

I don't think it was completely above board.
It looks it should have been treated as an addition €1000
income and taxed accordingly.

See

for more info.

Of course there is the wonderfully vague exception:
Non-cash personal gifts not related to employment

If a Ferrari F355 counts as a non-cash gift not related to employment, I'm sorted.

-Rd
 
Re: Xmas Vouchers

Hi Dalton,

Thanks for the informative response. I agree with what you stated and did not know about the 'Non-cash personal gifts not related to employment' even though if my company categorised it as this then it seems a bit dodgy. They were non cash in the sense they were vouchers and they also gave the same amount to everyone in the company so perhaps they were not related to performance in employment but to the best of my knowledge they did not give any to those passing the office on that day, etc so they must be related to employment unless the directors view the employees as their outer circle of friends.
 
Re: Xmas Vouchers

Infoseeker

Have you raised your concerns with your employer? I am sure they would be happy to apply paye/prsi on your benefits and deduct the relevant sum from your current/future payroll if you request this.
 
Re: Xmas Vouchers

I have not Tommy. If I do so I would be afraid that this would be applied to all the other 75 employees who received this and it would not make me the most popular person at xmas time. The question stems from the fact that I am changing career and am studying the AITI exams and could not see how they could do this.
 
Re: Xmas Vouchers

You don't need to raise the matter with your employer and risk ostracisation. Just raise it with your tax office and they will take it from there.
 
..

Info. up until Dec 31, 2003 the tax on vouchers was less than routing it through pay check.

For example, assuming you are on the 42% band last year, you would have got close to 700 euro worth of vouchers if your employer paid you 1000 euro worth of vouchers. It was some bizarre calculation(by the way, asked in here once or twice and never got definite answer how to calculate it!) but, it was something like paying tax on the portion you would get through PAYE or something strange. I finally managed to work out the same figure as what i got about 3 months after getting it! But it was just under 700 for each 1000. Think also you could only get upto about 5000 or 6000 k through vouchers before it became like ordinary pay again. that was to stop people asking to be paid through the year in vouchers.

However, that is not gone, and this year in your bonus, whether you get vouchers or cash, its treated exactly the same and you should get the same amount to the penny....


Incidentally, you know its possible yoru employers paid the tax due on yoru vouchers....i.e. if might have cost them 2000 or so to give you the 1000, as they paid the 6% PRSI, the 42%(or20%) tax and the employers PRSI as well on it(10.75%??).

In that case, you'd all ge grand, as employers can pay tax to give you the full figure they want to.
 
Gift

If does seem strange that the level of a gift that can be made is so low when the threshold for Capital Aquisitions Tax (Gift Tax) is so high.

A threshold of 22,822 euro applies where there is not a relationship as described above.
Click to expand...

Around Christmas I sometimes get small gifts from clients. You've got me wondering now about the Tax status of those gifts. I.e. if a client gives me €300 worth of gift vouchers, do those vouchers belong to my company? or to me?

It's well short of the Gift Tax Threshold, but if that was the way such gifts were taxed, then a client could in theory give me personally 22822 euro tax free, whereas giving such a gift to an employee would be classed as income and taxed accordingly.

If it is possible for people in business to grant each other such gifts tax free, then what would stop me lowering my rates in return for an annual "gift" of €22,822?

I presume Gift Tax applies to person to person gifts, but if that's the case, how are my €300 worth of vouchers taxed? (Business to Person). And what's the limit?

-Rd
 
Re: Gift

Hi Legend99,

Thanks for your response, I do vaguely remember the thread ur referring to. I suppose it is possible that my employer paid all the relevant taxes. I am not a goody goody 2 shoes but am more interested in how this type of activity is handled from a tax point of view as I am moving into this area as my future career after completed exams next year so as said before I am more curious than anything else. I thought that if an employer declared these vouchers that they would declare it on their Form 11 (this could be wrong as I have not checked this) and that if they did so then you will see some reference to in a future payslip as an employee ( this payslip reference is probably a figment of my imagination!!!)......btw still hoping we get the 1000 euros of vouchers this xmas!!
 
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