Third-party awards

Our team of experts tell you how to report third-party awards to HMRC

Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.

What are third-party awards?

When HMRC refer to third-party awards, they mean incentives that your employees might receive which are provided by someone other than your company – for example, if you run a health care company your employee might receive a cash award from a pharmaceutical company.

These awards can include cash, vouchers, cheques or other gifts. If your employees receive third-party awards of this nature, you might be required to report these awards to HMRC. There might be additional tax and National Insurance to be paid as a result.

How do you report these to HMRC and pay on them?

How you report and pay all depends on the kind of award your employee receives and whether the award has been arranged by your company.

For cash or cash-exchangeable awards, the third party is responsible for deducting PAYE tax from the award and paying that tax to HMRC. You are then responsible for deducting Class 1 National Insurance on the combined value of the award and the amount of PAYE tax that has been paid on it by the third-party.

For non-cash awards, it depends on who has arranged the award. If it has been awarded by the third-party, they are responsible for accounting for the tax due on the award. They do this through a Taxed Award Scheme. They are also responsible for paying any Class 1A National Insurance on the value of the award plus the tax paid on the award. There might be instances where Class 1 National Insurance is payable instead, for example if personal bills of your employee are paid on their behalf. If this is the case, you need to deduct and pay the Class 1 National Insurance not the third-party.

If you arrange the non-cash award, the tax still needs to be paid by the third-party but you are responsible for paying the Class 1 National Insurance.

How do you work out the value of the award?

Working out the value of the all depends on the kind of award it is. You should calculate the calculate as follows:

  • For cash awards, use the amount of cash awarded including the PAYE tax which has been paid
  • For vouchers, the value should be the cost to the third-party of providing the vouchers, including the PAYE tax which has been paid
  • For other gifts, you should use the cost to the third-party of providing the award to your employee.

How can DSR Tax Claims help?

We aim to make life as simple as possible for our clients and that includes giving you the information you need to make your taxes (and your life) simpler and less stressful.  Our team of experts at DSR Tax Claims are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.

This page was last updated on 07/11/2018.

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