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Tax treatment of incentive award schemes

Companies use incentive award schemes to encourage their employees in various ways. For example, to sell more of their own goods and services. The award can be in various forms including cash, vouchers or other gifts.

Where an employer meets the tax payable on a non-cash incentive award given to a direct employee by entering into a PAYE settlement agreement (PSA), the award is not chargeable to tax on the employee.

With the exception of non-cash awards covered by a PSA, the incentive awards made to employees are chargeable as employment income. The value of these awards is calculated as follows:

Cash
The value to use is the total amount of cash awarded.

Vouchers
If the award consists of vouchers, then the value to use is the full cost to the provider of making the award.

Other gifts
If the award is something other than vouchers, then the charge is usually the full cost to the provider of making the award. There are certain exceptions for the very low paid.

There are also concessions which HMRC makes to enable you to say thank you to staff for specific areas including encouragement awards, suggestion schemes and awards to reward long service. 

Source: HM Revenue & Customs Tue, 31 Aug 2021 00:00:00 +0100

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Some accountancy websites also provide pages and pages of tax information, helpsheets, etc. We prefer to give clients personally tailored advice. So, if you want details of tax rates and allowances just go to the HMRC website on which you should find what you’re looking for. If you need more individual advice please contact us.

Below are links to websites you may find of interest, but as we like to support our local community and clients, we have included links to websites that may be of interest:

HMRC
FT
BBC
VEALE WASBROUGH VIZARDS
CESP
PRACTICE INDEX
SIMCOMM ACADEMY

More Local:
FOOTPLATE EXPERIENCE
ANGLEBURY PRESS
OFFCAMBER.CO.UK