EIM01510 - 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 × £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 × £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 × £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 in full.