Employment Tax

Incentives, awards and prizes

Produced by Tolley
  • 19 Apr 2022 08:21

The following Employment Tax guidance note Produced 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)
  • Awards to employees of third parties

Incentives, awards and prizes

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. This note therefore guides you to the treatment and where to see further detail about the treatment depending on the type and method of provision. The PAYE treatment of particular types of employment income that are not cash is covered in ITEPA 2003, ss 693–702 (Pt 11, Ch 4). This includes cash vouchers, non-cash vouchers, credit-tokens, readily convertible assets, shares and securities. There is more general guidance on benefits 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.

Employee-run competitions where

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