I have been told it is possible to give an employee £1,000 tax free in recognition of long service. Is this correct?
No, but it is possible to make tax free non-cash awards to employees with no less than 20 years’ service provided the value of the award does not exceed £50 for each year of service for which the employee is being rewarded (which is probably the source of the £1,000 figure you were given). This rule does not apply if there has been a previous award by the same employer in the previous ten years.
In broad terms, the award may take the form of tangible moveable property, shares in a company which is, or belongs to the same group as the employer or the provision of any other benefit except cash, cash vouchers, credit tokens, securities or shares other than those previously described.