Non-cash gifts and awards (employee)

A new owner may want to thank the team at closing with gifts or long-service awards. The tax treatment starts from the Income Tax Act: section 6(1)(a) includes in income the value of board, lodging and other benefits of any kind whatever received or enjoyed because of employment, except any benefit the section excludes. The CRA’s payroll guidance addresses gifts and awards, and sets out an administrative policy that can exempt certain non-cash items.

What the CRA says

The CRA’s payroll page says gifts, awards and long-service awards provided to employees are generally taxable, and that the benefit from certain non-cash gifts and awards may not be taxable under its administrative policy. It says a gift has to be for a special occasion and an award for an employment-related accomplishment, not job performance; a reward given for performance-related reasons is a taxable benefit. If a non-cash gift or award is given for any other reason, the policy does not apply and the fair market value is included in the employee’s income. The page adds that the policy does not apply to cash or near-cash, or to a non-arm’s length employee such as a relative or shareholder.

What to check

• Whether the item is cash or near-cash, or truly non-cash, under the CRA’s page
• The reason for the gift: performance, service, or an occasion
• How the gift will be reported on the T4 if it is taxable

See how to handle payroll on closing day and taxable benefits.