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HMRC internal manual

Employment Income Manual

From
HM Revenue & Customs
Updated
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Employment income: exemption for suggestion scheme awards: the permitted maximum: financial benefit awards

Sections 321(6) and 322 ITEPA 2003

A financial benefit award is an award for a suggestion:

  • relating to an improvement in efficiency or effectiveness
  • which the employer has decided to adopt and
  • which the employer reasonably expects will result in a financial benefit.

The suggestion maximum for a financial benefit award is the greater of:

  • half the financial benefit that the employer reasonably expects will result from the adoption of the suggestion in the first year after its adoption, or
  • one tenth of the financial benefit that the employer reasonably expects to result from its adoption in the first five years after its adoption,

subject, in each case, to an over-riding maximum of £5,000.

The amount arrived at above is the maximum that the employer can pay, tax free, in respect of a single suggestion.

See also:
 

EIM06640 Two or more awards for same suggestion on same occasion.
   
EIM06650 Employee making more than one successful suggestion.
EIM06670 Employer using scheme to make non-qualifying awards.