§ Mr. Jessel
asked the Chancellor of the Exchequer if he will make a statement about the taxation of long-service awards to employees.
§ Mr. Nott
Yes. The Inland Revenue has recently reviewed the treatment for tax purposes of awards made to directors and employees as testimonials to mark long service. In law, all such awards are taxable and where they are made in cash tax must be deducted under the normal PAYE procedure. By concession, however, the Inland Revenue will not seek to charge tax in respect of long-service awards which take the form of tangible articles of reasonable cost when the award is in respect of a period of service of not less than 20 years and no similar award has been made to the recipient within the previous 10 years.430W
An article may be taken to be of "reasonable cost" where the cost to the employer does not exceed £2 for each year of service. This figure has been adopted in the expectation that it will not need revision for a considerable time to come.