Benefits in kind and salary sacrifice – proposed tax changes
The Government is considering changing the tax legislation on benefits in kind provided under salary sacrifice arrangements. There is a concern that these are creating a significant cost to the Exchequer, primarily for the benefit of higher paid employees. The proposal, therefore, is that with the exception of salary sacrifices for pension contributions, pensions advice, childcare and ‘cycle to work’ matters, any benefit provided by way of salary sacrifice will be taxable on the greater of the amount of salary sacrificed and the cash equivalent as laid down by the tax legislation. On that basis, for example, a mobile telephone provided by salary sacrifice would be taxable on the amount of salary sacrifice to obtain it as under the tax legislation the provision of such a telephone is exempt.
It follows, therefore, that any provision of benefits in kind and salary negotiation will need to be carefully managed to ensure that a composite package is agreed that does not involve a salary sacrifice unless the tax exemption for such benefits is to be lost. The provisions are out for consultation until 19 October but it seems reasonable to assume that we will know more about the proposals in the Autumn statement and draft 2017 Finance Bill which is normally out around Christmas time.
Date: 20th September, 2016
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