The Small Benefit Exemption: Everything You Need to Know

The Small Benefit Exemption is a straightforward, tax-efficient way for employers to reward employees and directors. Whether you’re running a large organisation or a family business, this scheme allows you to provide non-cash benefits without triggering tax liabilities—if you stick to the rules.

Here’s a practical breakdown to help you get it right:

1. The Current Limit: €1,000 for Now

As of today, employers can give up to two non-cash benefits per year, with a combined value not exceeding €1,000.

You may have seen some retailers advertising a new limit of €1,500, but be cautious: that increase doesn’t apply until 1 January 2025. For now, €1,000 is the cap.

2. It’s Not Just for Employees

This scheme isn’t limited to employees; company directors can benefit too, as long as they’re on the payroll and earning taxable income (Schedule E).

For family businesses, this is particularly useful. Family members often pitch in with unpaid roles, but here’s the best practice:

• Put family members on the payroll, even if it’s a nominal salary that reflects the work they’re doing.

• Not only does this ensure compliance with employment regulations, but it also makes them eligible for the Small Benefit Exemption.

Unpaid family members or directors without taxable income don’t qualify, so make sure everything is above board.

3. Salary Sacrifice Isn’t an Option

One key condition of the scheme: the benefit cannot replace salary. If an employee agrees to sacrifice part of their pay in exchange for a voucher or benefit, it becomes taxable. Keep salary and benefits separate to stay compliant.

4. Employer Benefits

The exemption isn’t just advantageous for employees—it’s a smart move for employers too. Why?

• Tax-Deductible: The cost of the benefit can be claimed as a business expense.

• No Employer’s PRSI: Unlike other benefits, you won’t have to pay PRSI on these incentives.

5. Real-Time Reporting is Essential

From 1 January 2024, Revenue requires all benefits to be reported in real time. Employers must:

• Record the date and value of each benefit when it’s provided.

• Ensure payroll systems are updated to handle these requirements.
  

Real-time reporting makes compliance more transparent but also means employers need to stay on top of their records.

Final Thoughts

The Small Benefit Exemption is simple, effective, and a win for both businesses and employees. For now, the limit is €1,000, but the upcoming increase to €1,500 in 2025 makes it worth planning ahead.

If you’re a company director or running a family business, this scheme can work for you too. By putting family members or directors on the payroll, you can reward their contributions while staying compliant with tax regulations.

Keep it clear, keep it compliant, and don’t hesitate to seek advice if you need help navigating the details.