Employers urged to make use of BIK exemption

EMPLOYERS could give €480 million in tax-free payments to employees if they utilise the small benefit-in-kind (BIK) exemption which was increased by Finance Minister Brian Cowen in the Budget.

The Budget increase in the exemption threshold, from €100 to €250, could be worth in excess of €480m to Irish employees in 2005, according to the managing director of The Gift Voucher Shop Michael Dawson.

To qualify, the payment must be made in one go. It qualifies for tax relief even where other benefits are made to the employee.

Mr Dawson, whose company sells almost €30 million a year in gift vouchers, redeemable at over 3,500 outlets across the 32 counties, said many employers do not use the scheme, which was introduced last year.

“This is a simple scheme to operate as there is no need to make a return to the Revenue once it has been properly recorded in the accounts. There is €182m available in business tax concessions under the Small Benefit Exemption scheme for 2004. This BIK concession for 2004 can still be used for Christmas and end-of-year bonus purposes,” he added.

The exemption for 2004 is just €100 but this will increase to €250 next year, when an employer provides an employee with a once-off benefit during the 2005 tax year of up to €250 by way of a gift voucher. This payment is not subject to PAYE or PRSI.

Mr Dawson said his company, which is part of the Killorglin-based Fexco group, lobbied Mr Cowen to expand the voucher scheme.

“We have seen a serious curtailment in the amounts companies provide to staff as bonuses and incentives since the changes in the 2003 Finance Act which all but eliminated any financial benefit to paying staff non-cash bonuses or incentives.

“Many of the companies that we deal with had changed to paying bonuses in cash which resulted in employees receiving a much smaller take-home bonus.

“We do not expect to see a return of the pre-2003 budget BIK allowances where some employees received concessions of up to €6,000 in non-cash bonuses. However, both employer and employee groups will welcome this latest initiative as more equitable,” he said.