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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Employment income: exemption for long service testimonial awards: example

Section 323 ITEPA 2003

An employee receives long service awards from her employer as follows (all the awards are made on or after 13 June 2003):

  • after 20 years service, an article costing £1,000
  • after 30 years service, an article costing £500
  • after 35 years service, an article costing £625
  • after 40 years service, an article costing £1,000.

Exemption is due as follows:

The 20 year award is not taxed. This is the first award received, the 20 year condition is satisfied, and the cost does not exceed £50 for each year of service (20 x £50 = £1,000). If the article had cost £1,500, tax would have been charged on the excess over £1,000 (see EIM01501).

The 30 year award is not taxed. It satisfies the conditions for exemption (see EIM01500), and it does not matter that the employee has already received a tax-free award.

The 35 year award is taxed in full. It is within the monetary limit (35 x£50 = £1,750), but no exemption is due because the employee received a similar award within the previous 10 years (see EIM01503).

The 40 year award is taxed in full. It is within the monetary limit (40 x£50 = £2,000), but no exemption is due because the employee received a similar award within the previous 10 years. The 35 year award is counted even though it was taxed infull.