The following Employment Tax guidance note by Tolley in association with Paul Tew provides comprehensive and up to date tax information covering:
An employee may be encouraged to share ideas with their employer that might benefit the business. These ideas may be posted in a staff suggestion box, posted on the company intranet or any other suitable method of delivery as agreed with the employer. Any payment made by an employer in recognition of the employee’s idea would ordinarily be taxable. However, a specific tax exemption exists for suggestion awards, subject to certain conditions.
Awards made by an employer to an employee, exempt from income tax, provided that all the following conditions are met:
ITEPA 2003, s 321
The suggestion must be outside the scope of an employee’s normal duties. Many employee suggestions are made as a result of an employee coming up with an idea about something they know about as a result of their job.
See Example 1.
The legislation splits the awards into two separate definitions: a ‘financial benefit’ and an ‘encouragement award’. A ‘financial benefit’ award is an award for a suggestion relating to an improvement in efficiency or effectiveness which the employer
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