Tax-free bonuses for innovative workers

Employers can motivate workers and boost productivity through tax-free bonus payments of up to £5,000 for innovative ideas that create financial benefits.

The reward scheme is available to all employees and relates to suggestions for improving efficiency or effectiveness that a company uses to increase its bottom line performance.

As well as financial benefit awards, employers can also make tax-free encouragement awards of £25 per head for ideas that show commercial merit or special effort by a member of the workforce.

“These tax-free schemes are great business improvement tools for entrepreneurial companies looking to develop their activities by involving a motivated workforce,” said Mervyn MacDonald, a partner at Manchester accountants and business advisers DTE.

“The only conditions are that ideas can’t be put forward at meetings held for the purpose of producing suggestions, and must be made outside the scope of an employee’s normal duties.”

For financial benefit awards, the limit on tax-free payments is half the expected financial benefit in the first year following the adoption of a suggestion, or ten per cent of the benefit over five years, up to a maximum of £5,000 per head.      

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