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HMRC internal manual

Employment Income Manual

Employment income: exemption for suggestion scheme awards: conditions for exemption

Section 321 ITEPA 2003

The conditions that must be satisfied for a suggestion scheme award to qualify for exemption under Section 321 ITEPA 2003 are as follows:

  • the employer’s scheme must be open on the same terms to

    • all the employees of the employer, or
    • a particular description of them. For example, a scheme which is open to all the employees in a particular building, or in a particular geographical area, will satisfy this condition.


  • the suggestion must relate to the activities carried on by the employer
  • the suggestion was made by an employee who could not reasonably have been expected to make it in the course of the duties of their employment, having regard to the employee’s experience
  • the suggestion was not made at a meeting held for the purpose of proposing suggestions
  • the award is an encouragement award (see EIM06620) or a financial benefit award (see EIM06630).

If all the above conditions are satisfied, the award will be exempt from tax if, or to the extent that, it does not exceed the permitted maximum for the award. If an award that satisfies the conditions exceeds the permitted maximum, only the excess will be taxed.

The amount of the permitted maximum depends on whether the award is

  • an encouragement award (see EIM06620), or
  • a financial benefit award (see EIM06630).