Incentives, awards and prizes

By Tolley

The following Employment Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Incentives, awards and prizes
  • Introduction ― incentives, awards and prizes
  • Cash
  • Vouchers exchangeable for cash
  • Non-cash awards
  • Trivial amounts
  • PAYE Settlement Agreements (PSAs)

Introduction ― incentives, awards and prizes

Employers may use a variety of methods to reward and encourage employees in their work. These are commonly known as incentives, awards or prizes. For the purposes of this note, the term ‘award’ will be used to cover all circumstances. The tax treatment will depend on the type of award and how it is provided; there is no specific legislative provision for awards. The PAYE treatment of particular types of employment income that are not cash is covered in ITEPA 2003, ss 693–702 (Part 11, Chapter 4). This includes cash vouchers, non-cash vouchers, credit-tokens, readily convertible assets, shares and securities. There is more general guidance on benefit and other non-cash earnings in the Non-cash earnings ― overview guidance note.

Prizes in employer-run competitions attract PAYE and reporting consequences in the same way as any earnings or benefits would

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