The Small Benefit Exemption (SBE) – Examples

Please note: The below examples have been taken from Revenue’s Tax and Duty Manual Part 05-01-01E.

Example 1

Philip is a high performing employee. His employer is aware of the small benefit exemption and in 2023 wants to issue him with a voucher worth €600 during the year to show appreciation for his efforts. This is the first and only voucher provided to Philip by his employer in 2023.

As the value of the voucher does not exceed €1,000, it meets the requirements under section 112B TCA 1997 to avail of the small benefit exemption. Philip’s employer can provide the voucher to him and no tax charge will arise.

As outlined in paragraph 4 above, if the benefit were instead provided in 2024, the employer would be required to report this benefit to Revenue in real time.

Example 2

Barry works as a sales representative for a medical device manufacturer. He receives a voucher worth €500 in February 2022.

When the company issues its financial results in June 2022, all company employees including Barry are rewarded with a voucher valued at €200, in recognition of their efforts in the previous accounting year.

In the first week of December 2022 Barry receives a further voucher from his employer with a value of €500. The value of the third voucher provided to Barry in December 2022 is fully chargeable to tax, as it is the third relevant incentive provided to Barry by his employer in 2022.

A qualifying incentive is a relevant incentive that is the first or the second relevant incentive given to an employee in a year of assessment where:

(a) in the case of a first relevant incentive, the value does not exceed €1,000, and

(b) in the case of a second relevant incentive, the cumulative value of the first and second relevant incentives does not exceed €1,000.

Therefore, where the first and second voucher or benefit meets the conditions to be a qualifying incentive, the exemption applies. It is not permissible to opt to tax the first and/or second qualifying incentive in a year of assessment to allow an employee to avail of the exemption later in the year when a third benefit is granted with a higher value.

If the vouchers were instead provided in 2024, the employer would be required to report details of the first and second voucher to Revenue in real time.

Example 3

Marina works in an engineering company and earns €91,000 per annum. The company is undergoing a reorganisation and, as part of the reorganisation, in June 2023 Marina has agreed to the following changes in her terms of employment:

• Marina’s salary will be reduced to €90,000,

• Marina will forego €1,000 of her salary in favour of an annual travel pass issued by an approved transport provider (under the terms set out in section 118(5A) TCA 1997) valued at €1,000 per annum, and

• Marina will also receive a single shopping voucher of €500 per annum.

Marina has received the shopping voucher as part of arrangement she made in exchange for a reduction in her salary. The voucher will therefore not qualify for the small benefit exemption and Marina’s employer must operate IT, PRSI and USC on the face value of the voucher.

Additionally, as the voucher acted as an incentive payment for Marina to take up the salary sacrifice arrangement, the full value of the salary sacrificed will remain taxable under section 118B(4)(b) TCA 1997.

Example 4

Brenda is dismissed from her employment in January 2023. She brought a case to the Workplace Relations Commission after her dismissal as her employer had not paid her final month’s salary of €2,000.

Following discussions in advance of the hearing, her employer offered to pay her €1,500 salary and provide a €500 voucher in order to settle the case. Brenda accepted this offer.

As Brenda’s dispute related to unpaid salary, the €500 voucher would be considered part of a salary sacrifice arrangement because Brenda agreed to accept this amount in lieu of €500 salary owed to her. As such, Brenda’s former employer is required to operate IT, PRSI and USC on the face value of the voucher as the small benefit exemption does not apply in this case.

Example 5

Noel’s employer provided him with a gift card valued at €400 when the company reached its financial targets in June 2023. The gift card can either be used in store or online by Noel to purchase goods and services. It can also be inserted into a cash machine and used to withdraw cash.

As the gift card is redeemable, in full or in part, for cash it will not be a qualifying incentive for the purposes of the small benefit exemption, and Noel’s employer must operate IT, PRSI and USC on the value of the gift card. This is the case irrespective of the fact that Noel might not actually use the card to withdraw cash.

Example 6

Denis receives a long service award in June 2023 from his employer having completed 20 years of service. The award is a Waterford crystal bowl with a value of €50. In December 2023 Denis receives a voucher for €1,000.

To note, long service awards are generally chargeable to tax. However, a Revenue practice provides that where an award takes the form of tangible articles of reasonable cost, a charge to tax will not arise provided that:

• the cost to the employer does not exceed a maximum of €50 for each year of service,

• the award is made in respect of a period of service of not less than 20 years, and

• no similar award has been made to the recipient within the previous 5 years.

As Denis has never received an award of this nature previously, the bowl meets the conditions to avail of the long service award treatment.

Therefore, the voucher that Denis receives in December will be his first relevant incentive in 2023 and since it meets the conditions of section 112B TCA 1997, it will qualify for the exemption from the charge to tax.

However, where the conditions to avail of the long service award practice are not met and the conditions of section 112B are met, then the award will count as a relevant incentive and the section 112B exemption will apply.

For example, if Denis had only completed 10 years of service, then the bowl valued at €50 would not qualify for the Revenue practice. Where it met the conditions of section 112B, it would constitute his first relevant incentive in 2023.

As the voucher granted to Denis in December is for €1,000, the cumulative value of the first and second relevant incentive is in excess of €1,000. Therefore, the conditions of section 112B TCA 1997 are not met. As a result, the €1,000 voucher will be subject to IT, PRSI and USC.

Example 7

During 2023 David receives the following benefits from his employer:

• a hamper at Easter valued at €100, and
• a voucher at Christmas worth €900.

As the cumulative value of both incentives does not exceed the monetary limit of €1,000 and on the basis that the other conditions of section 112B TCA 1997 are met, the small benefit exemption will apply to both incentives.