Any salaried employee of a business can be paid a long service award. The way in which the award is given can radically influence the tax treatment!
All cash awards are taxable. They will be treated as part of your remuneration and subject to deduction of tax and National Insurance. Cash awards include:
* a payment including a cheque (This also rules out National Savings Certificates, premium bonds and so on.)
* a cash voucher
* a credit token
* shares other than those issued by the company employing the person who receives the award
* an interest or rights over securities or shares
Non cash awards are tax free if certain conditions are met. The conditions are:
1. The award must be made to mark a period of not less than 20 years service with the same employer.
2. It must not be a cash payment.
3. The taxable value of the award must not be more than £50 for each completed year of service.
For most employees the amount of the award is determined as the cost to the employer. For lower paid employees it is the second hand value of the award.
If the award exceeds the £50 for each year of service limit, only the excess is taxable.
If an employer makes multiple awards to the same individual, say after 20 years and then again after 30 years; each award qualifies as a separate award – this further concession does not apply unless there is a gap of at least 10 years between the awards.
If you have clocked up 20 years service you could receive goods to the value of £1,000 and pay no tax or National Insurance – that buys a lot of golf equipment!