Long service awards

By Tolley in association with Paul Tew

The following Employment Tax guidance note by Tolley in association with Paul Tew provides comprehensive and up to date tax information covering:

  • Long service awards
  • Long service award exemption conditions
  • Taxable long service awards
  • What are the reporting requirements to HMRC?
  • NIC
  • PAYE
  • PAYE Settlement Agreement (PSA)
  • P11Ds

Employee recognition by an employer can be an important motivational tool, as well as having a positive effect on an employee’s desire to remain with the company or organisation. Most employer awards made to an employee are liable to be treated as taxable earnings under ITEPA 2003, s 62 or as a benefit under ITEPA 2003, s 201 because they are given as a ‘reward’ by reason of the employment. However, subject to certain conditions being satisfied, a specific tax exemption exists for long service awards.

Long service award exemption conditions

Long service awards made to employees to mark long service are exempt from PAYE provided the following conditions are satisfied:

  • the employee must have had a period of service of at least 20 years with the employer making the award
  • no similar award has been made to the recipient by the same employer within 10 years prior to this award being made, irrespective of the tax treatment of any earlier award
  • the award must not have cost the provider more than £50 per year of the employee’s service in respect of which the award was made (so for 20 years, 20 x £50 which is £1,000)
  • the award must broadly be something other than money such as a physical item (eg a watch or a clock) or shares in the employer

ITEPA 2003, s 323

The exclusion of money excludes common payment types such as cash, cheques, National Savings Certificates and premium bonds. Most non-cash awards are like

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