When provided through salary sacrifice, all exempt benefits will become taxable with effect from 6 April 2017. As defined in the HMRC guidance “A salary sacrifice arrangement is an agreement between an employer and an employee to change the terms of the employment contract to reduce the employee’s entitlement to cash pay. This sacrifice of cash entitlement is usually made in return for some form of non-cash benefit.” In simple terms, if the employee is given a choice between cash and benefits, these provisions will be invoked.
However, the following benefits will remain exempt:
- Payments into a registered pension scheme
- Employer provided pensions advice
- Childcare vouchers
- Employer provided child care
- Bicycles and cyclist safety equipment
- Ultra low emission cars (less than 75g CO2/km)
Apart from the above, all benefits will now carry Class 1A NIC charge and PAYE liabilities. The point at which these benefits will become taxable is the earlier of:
- Renewal/change to arrangement (including auto-renewal)
- April 2018 (April 2021 for cars which are not ultra low emission, accommodation and school fees)
It is important to note here, if there is no salary sacrifice arrangement and the benefit is exempt, then there is no tax charge.
For example, provision of a mobile phone exclusively for business use is not a taxable benefit. If a mobile phone is provided by the employer and there is no salary sacrifice for such provision, then it will not be a taxable benefit.
If you would like advice on salary sacrifice, and what it means for your business, please contact us on 01256 406 601.