There are many advantages to creating an employee suggestion scheme where employees are rewarded for making suggestions that benefit your business. Apart from the value that these suggestions can have in saving money or driving new business ideas there are also tax-free benefits associated with running these schemes.

HMRC list two kinds of award that can be given to employees:

The amount that is exempt is the greater of:
– 50% of the money you expect the suggestion to make or save your business the year after you implement the idea, or
– 10% of the money you expect it to make or save your business in the first five years after implementation.

There are other conditions that must be met for the payments to employees to be tax-free. We can assist you in designing and setting up a tax efficient suggestion scheme and providing basic scheme rules.

Source:HM Revenue & Customs | 27-05-2024