Income Tax (Earnings and Pensions) Act 2003 section 322

Suggestion awards: "the permitted maximum"

Section 322 sets out the tax-free limits — known as "the permitted maximum" — for suggestion awards made by employers to employees under the exemption in section 321.

• Encouragement awards (where no financial benefit has yet been established) are exempt up to a maximum of £25 per award.
• Financial benefit awards are exempt up to the "suggestion maximum", which is the lower of £5,000 or a calculated share of the financial benefit expected from adopting the suggestion.
• Where multiple employees share an award, or further awards are made for the same suggestion on later occasions, the exempt amount is divided proportionately and reduced by any amounts previously exempted.
• The financial benefit share is the greater of half the expected benefit in the first year after adoption, or one-tenth of the expected benefit over the first five years after adoption.