Suggestion schemes

Produced by Tolley in association with

Employment Tax

Guidance

An employee may be encouraged to share ideas with their employer that might benefit the business. These ideas may be posted in a staff suggestion box, posted on the company intranet or any other suitable method of delivery as agreed with the employer. Any payment made by an employer in recognition of the employee’s idea would ordinarily be taxable. However, a specific tax exemption exists for suggestion awards, subject to certain conditions.

What constitutes a tax exempt suggestion scheme?

Awards made by an employer to an employee are exempt from income tax, provided that all the following conditions are met:

•
the employer formally adopts a suggestion scheme that is open to all employees in general on equal terms or to a particular group of them. A scheme which is open to all the employees in a particular workplace or geographical area satisfies this condition
•
the suggestion relates to the activities carried on by the employer
•
the employee could not reasonably have been expected to put forward the suggestion in the course of their employment duties,

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Paul Tew

Writer and advisor at Paywatch

Paul Tew is a freelance adviser, primarily in the areas of pay, personal taxation and remuneration planning. A frequent contributor to technical journals on pay and benefits issues, having written for the "In Business" section of the Times. Paul continues to supply articles for various recognised professional publications including Pay and Benefits magazine, Taxation magazine and Company's Secretary's Review. Paul also has had several loose leaf and bound books published on a variety of subject matter including PAYE, NIC, Sickness and Maternity Pay.Paul has written and presented training courses as well as headed up payroll and employment help desks and acted as an assessor for recognised Payroll/HR qualifications. Paul previously worked in the healthcare and oil sectors managing Pay and benefit services, so has many years of experience in dealing with PAYE and employment compliance issues across a broad range of industries and organisations.

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