Rewarding an Employee for Long Service
HMRC allows certain gifts to be made in recognition of long service, subject to some conditions. To qualify, the gift:
- Must be for 20 or more years of service
- Is not cash or vouchers that can be converted into cash
- Does not cost the employer more than £50 for each year of service; and that
- Where more than one long-service gift is made to the same employee (or director) the exemption can only apply if there’s at least ten years between each gift
One way of putting cash into the employee’s hand (without actually doing so) could be to purchase something that they would normally but themselves, e.g. a season ticket at their favourite football club, a travel card or fitness club.
Another option is to consider making an employer’s pension contribution, of which 25% would be tax free when accessed. If they are 55 or over they can do this immediately, so making a contribution of £4,000 could be put £1,000 in their pocket tax free.