Gifts and awards given through prize draws and social committees

Prize draws

There are several scenarios in which an employee may win a gift or award via a prize draw.  All of these situations are outside of our gifts and awards policy; however, they do merit some comment.

• An item given to one employee by an employer via a prize draw - a taxable benefit is something that an employee gains by virtue of his or her employment.  If the draw is only open to employees of the company, then any item won is a benefit of employment, and therefore, is taxable.
• An item paid for by the employer and given via a draw to an employee of a high-performing team - in this example, the prize takes on the nature of performance pay, or a thanks for a job well done, and as such, is a taxable benefit to the employee.
• An item paid for by a social committee and given via a draw - our policy applies specifically to employer/employee relationships, and a social committee may be outside that.  If the social committee is not funded and controlled by the employer, a prize won via lottery from the social committee is considered to be a windfall.  If the employer does fund or exercise control over the social committee, the prize may be taxable.

Please refer to Income Tax Folio S3-F9-C1: Lottery Winnings, Miscellaneous Receipts, and Income (and Losses) from Crime for more information about the tax treatment of lotteries and prize draws.

Gifts and awards given by Social Committees

Whether gifts and awards given by a social committee are taxable employment benefits depends on whether or not the committee is funded by the employer, by the employees, or a combination of both.

If the committee is funded entirely by the employer, items given by the social committee are taxable employment benefits and our gifts and awards policy would apply. This means that if the other conditions of the policy are met, the gift or award is non-taxable.

Generally, if the committee is funded entirely by the employees through fundraising activities, any gifts or awards given by the social committee are non-taxable, akin to a return of contributions.

If the employees and the employer jointly fund the social committee, generally, the percentage that is employer funded represents a taxable benefit to the employee, and our gifts and awards policy would apply to that percentage of the gift or award given to the employee.

Each situation must be considered on its own merits.  If you have a situation you would like us to review and give an opinion on, please contact us.

Date modified:

2015-12-17