Employee Benefits II

Table of Contents

Certain Benefits in Kind

Certain benefits in kind outside the benefits in kind taxing legislation is exempt. This includes

accommodation which is necessary for a particular business or employment;
the provision of meals in a canteen provided for the staff generally;
pensions, annuities, sums and benefits given on death, the retirement of a director or employee;
certain benefits or facilities including travel pass,
membership of a professional association,
mobile phones, high-speed Internet connection,
certain IT equipment, subject to conditions
bicycles subject to conditions
child minding services actually provided by the employer.

Finance Act 2018 amends the exemption from benefit in kind for electric vehicles provided to employees. It amends the exemption which was due to expire at the end of 2018 to the end of 2021. There is a cap of €50,000 on the value of the car. Benefit in kind at standard rate supply is on the amount of the excess over €50,000.

Exempt Benefits

The following are exempt from the benefit in kind provisions for employees

The provision of monthly or annual bus or train passes issued by an CIE company or other licensed operator;
mobile phones where private use is incidental;
high-speed Internet connections in the employee’s home for business use;
computer equipment for business use where private use is incidental;
subscriptions for professional bodies, where it is relevant to the business of the employer;
subsidised childcare facility;
providing security, assets or services to an employee where there is a serious threat to physical safety, arising from employment
meals and a canteen available for all employees
sports and recreational facilities available to all employees
certain meal vouchers
pension contributions
certain staff in has medical plans and services where contributions are made by staff
certain medical checkups
Christmas parties and equivalent events open to all employees
Exam and course fees for qualifications related to the employment
Visas and work permits
Newspapers and periodicals related to the employer’s business
Car parking provided by employer (subject car Park Levy never commenced )

The Revenue has published guides on these and other benefits in kind.

Qualifying Incentive

A ‘qualifying incentive’ is defined as a voucher or other tangible non-cash benefit that is given by an employer to an employee in a year of assessment.
The voucher or tangible non-cash benefit must also meet all of the following
conditions in order to be a qualifying incentive:

the voucher or benefit cannot be part of any salary sacrifice arrangement between the employee and employer,
the voucher or benefit can only be used to purchase goods or services and cannot be exchanged in part or in full for cash,
he voucher or benefit cannot exceed €500 in value, and
only one voucher or benefit may be given in any one tax year.

Where all of the above conditions are met the voucher or benefit will be a qualifying incentive and will be eligible for the small benefit exemption, meaning no tax is payable on the receipt of the voucher or benefit by the employee. If all of the above conditions are not satisfied, the voucher or benefit will not meet the criteria for the small benefit exemption, and PAYE, USC and PRSI will be
chargeable on same. See

Finance Act 2022 provides for an exemption from Income Tax, PRSI and USC, where an employer provides an employee with a qualifying incentive, where all of the conditions contained within the provision are satisfied.

It inserts a new definition of qualifying incentive which provides for:

n increase in the combined aggregate value of benefits or vouchers an employer can give in a tax year to a maximum of €1,000 (from €500) and
an increase in the combined number of qualifying vouchers and benefits that can be given in a tax year from one to two.

The above changes apply for 2022 and subsequent years.

Medical Insurance

In most cases medical insurance benefits from tax relief at source. The insurer makes the claim.In effect, the amount paid by the insured person is deemed the tax exclusive amount and the insurer may reclaim the difference at the standard rate of 20%

Where an employer pays medical insurance(qualifying health expenses), tax is payable in respect of the gross payment (the amount paid plus the credit obtained by the insurer) on the benefit in kind.. The deduction is made under the PAYE system. The employee remains entitled to claim Tax Relief at Source (TRS) credit. This may be granted as an increased tax credit for the employee.

The cost of medical check-ups by the employer which the employee is obliged to undergo is not a taxable benefit.

There is an age-related tax credit in relation to premiums paid. The maximum amount on which relief is granted for an adult is €1000 (€200 credit actually paid) and €500 in respect of children. The relief relates only to qualifying health expenses, so that where the policy other provides other benefits and apportionment may be required of the qualifying amount..

Employee Facilities

Sports and recreational facilities available on the employer’s premises for use by employees generally is not treated as a benefit. Conversely, where it is available to some employees only, it may be a taxable benefit. Where a block payment is made providing benefits to all staff or on behalf of particular number of them, this must be apportioned as notional pay. Employees who do not avail of the benefit will not be taxed.

Where an employer operates an in-house medical plan under which staff contribute and claim from the plan, or if the employer retains a general medical practitioner whose servces can avail be availed of, tax is not applicable to the benefit arising from the employer’s contribution or the cost of employing the GP.

Staff discounts at up to cost of the goods to the employer or the costs of manufacture, is not a taxable benefit. Discounts greater than these amounts are taxable.

Christmas parties, sports days, and benefits such as meals provided at events for the staff generally, are not taxable where the expenses incurred are reasonable.

Work Related Benefits

Where a home telephone is used for business and private use, the amount of the notional benefit is 50 percent of the costs incurred less amounts reimbursed to the employer by the employee. If a second home telephone is provided by the employer that is not taxable benefit where private use incidental.

Course fees and exam fees relevant to the business are not taxable benefits. It must be necessary for the duties of the employment and relate directly to increasing the effectiveness of the performance of the employee’s present and future duties.

Free newspapers, generally related to the employer’s business are not taxable benefits.

Travel

An exemption is provided from income tax and USC in respect of vouched expenses of travel and subsistence for a non-resident, non-executive director of a company. They must be incurred exclusively for the purpose of attendance by a director, at a relevant meeting (as defined).

Travel and subsistence payments to certain examiners involved in state examinations are exempt to the extent they did not exceed civil service expenses rates.

The cost of entry and exit visas and work permits are not taxable benefits.

Awards

Awards given in passing exams and achieving qualifications, which relate to the employee’s duties are not a taxable benefit, provided that is a reasonable reimbursement of expenses likely to have been incurred in studying for the qualification or sitting the exam.

Long service awards which are testimonials and marks of service for at least 20 years by way of a tangible article of reasonable cost, are not taxable benefits. The cost must not exceed €50 for each year of service and no similar award can have been made in the last 5 years. This does not apply to cash or cash equivalent.

Net of Tax

In limited circumstances, an employer may agree with the Revenue for the provision of net benefits, tax-free. The benefits must be minor and irregular.

The employer must agree them in writing with Revenue, before the end of the relevant year. The liability must be paid by the employer within 46 days of the end of the tax year. Tax is determined by reference to the gross value of the benefit.

Where the employer accounts for PAYE, the benefits are not part of the total income of the employee. They are not required to be included on the P60.

Health Insurance

Tax relief at source for health-insurance premiums is limited to the premium, net of tax credits under the risk equalisation scheme under the Health Insurance Act. Employers who pay a premium on behalf of employees, effectively pay it net of tax due to the tax relief at source mechanism.

Tax relief at source is clawed back as employers are obliged to self-assess and pay Revenue income tax and premiums. This is allowed as an additional deduction so that employers are placed in the same position, as if they had paid the premiums gross to the insurers. It is treated as a benefit in kind on which the employee is liable to income tax at the marginal rates.

The standard rate tax relief at source is to be net of any ‘‘risk equalisation credit’’ under the permanent health insurance risk equalisation scheme. It ensures that following the commencement of the risk equalisation scheme the correct tax relief at source is granted in respect of medical insurance premiums paid by individuals.

Where an employee of a health or dental insurer receives such a policy in the course of employment, the discount received is a taxable emolument. This also applies to policies through discounted policies for family members.

Anti-Avoidance

FA 2013 provides an anti-avoidance income tax charge on employees, former employees and prospective employees or persons connected with them, where they receive benefits under any scheme, trust or arrangement (including a trust covenant or other arrangement), other than those subject to a benefit in kind) which are directly or indirectly funded by the employer, former employer or prospective employer or persons connected to them.

To the extent that the benefits are not otherwise chargeable to income tax, a charge is made on the amount of the payment, the cost of the benefit or the value of the asset. The provisions are aimed at benefits derived from non-resident trust for the benefit of employees.Where the benefit is a loan and is repaid, the tax may be repaid.

There are exceptions from the provisions for approved profit-sharing schemes; employees share ownership trust and occupational pension schemes.

Pension Contributions

Pensions are dealt with in detail in other sections.

Contributions made by employers to superannuation schemes and permanent health insurance, may be allowed under a net pay arrangement. The benefits are exempt and the arrangement short-circuits the claiming of the relief by the employee.

Employee contributions to a PRSA had been subject to benefit in kind and liable to USC. The Finance Act 2015 exempts the employer’s contributions from USC, so that the exemption for contributions to occupational pension schemes and PRSAs were equalised.

Electric Cars

Finance Act 2017 provides an exemption from the benefit in kind charge in relation to expenses incurred by an employee in the provision of a facility on business premises for electric charging of vehicles of employees and directors.

There is a benefit in kind exemption for cars where the employer provides a director or employee of a car driven by an electric motor up to the end of 2018.

There is a benefit in kind exemption for vans provided by an employer to an employee or a director for a vehicle powered by an electric motor. This is available to the end of 2018.

Finance Act 2019 extends the exemption for BIK charge electric cars and vans with a market value of less than €50,000 to 31 December 2022. From 1 January 2023, a new charging regime for employer provided cars will take effect that will be based on kilometres travelled and the CO₂ emission levels of the car. Also, the rate of Benefit-in-Kind on employer provided vans will increase from 5% to 8% of the original market value of the van from 1 January 2023.

Finance Act 2021 amends the application of benefit-in-kind to employer provided cars and vans respectively. This measure provides relief from the benefit-in-kind charge applicable to employer provided electric vehicles which are made available for use in the period from 1 January 2023 to 31 December 2025.

Under this provision, the original market value of an employer provided electric vehicle, for the purposes of determining the cash equivalent, is reduced by

€35,000 in respect of vehicles made available in the 2023 year of assessment;
€20,000 in respect of vehicles made available in the 2024 year of assessment; and
€10,000 in respect of vehicles made available in the 2025 year of assessment.

Any excess amount after this reduction is chargeable to benefit-in-kind at the prescribed rates.

Key Employee Programme

Finance Act 2017 introduces key employee engagement program for qualifying share options granted to employees of qualifying small to medium enterprises. The options must be granted at not less market value as of the date of grant.

Gains realised on the exercise of the option by employees of qualifying small to medium enterprises are not subject to income tax, PRSI or universal social charge at the date of exercise. It is subject to capital gains tax of a subsequent disposal of shares.

The share options must be held for a minimum of one year before exercise. It must be exercised within 10 years of grant in order to avail a relief. The provisions are available in respect of share options granted to employees of qualifying unquoted companies between 1st January 2018 and 31 December 2023. The provision is subject to EU state aid approval.

Child Care

Finance Act 2018 amends a scheme of accelerated capital allowances for equipment and buildings used by employers for the purpose of providing childcare services and a fitness centre to employees. The scheme was introduced in 2017 subject commencement.

Amendments were made to ensure that the relief is a general measure available to all employers which is to commence on 1 January 2019. The 2017 provisions were not commenced.

The amendments comprise the removal of the restriction on use of the relief by trades comprising wholly or partly of the provision of childcare services and fitness facilities and the insertion of a new restriction of the facilities provided are not accessible or available to use by the general public.