Rennie Welch LLP
Q: A number of our employees receive benefits via salary sacrifice arrangements however I note that changes to the salary sacrifice rules have been announced recently and that these come into force from April 2017?
A: Under salary sacrifice arrangements, employees exchange some of their salary for a non-cash benefit resulting in tax and National Insurance savings on the element of salary that has been sacrificed.
The government was concerned that such arrangements put employees and employers who don’t use such arrangements and hence don’t benefit from these tax advantages, at a disadvantage to those who do and, to address this imbalance, new rules withdrawing the tax advantages available under some salary sacrifice schemes were announced in the Autumn Statement. These come into effect from 6th April 2017.
The rules for salary sacrifice arrangements relating to pensions, pension advice, childcare vouchers, workplace nurseries, directly employer contracted childcare, cycle to work schemes and ultra-low emission cars remain unchanged, however, for all other salary sacrifice arrangements, the new rules will apply and the taxable value will be the higher of the value of the benefit received or the amount of salary sacrificed.
Where salary sacrifice arrangements were entered into on or before 5th April 2017, the existing arrangements are protected for up to a year (until the earliest of the date on which the salary sacrifice contract renews/is changed/ends or 6th April 2018). The protection is extended to up to four years where the arrangement relates to cars, accommodation or school fees (i.e. until the earliest of the date on which the salary sacrifice contract renews/is changed/ends or 6th April 2021).
If an employee starts an arrangement on or after 6th April 2017, the new rules will apply immediately.
All employers should familiarise themselves with the new rules, review the salary sacrifice arrangements held by their employees and address any changes required to their payroll and HR procedures accordingly.
Rennie Welch LLP accept no liability on the basis of this article and detailed advice, taking into account individual circumstances, should always be obtained.
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