New rules came in to force from April 2017 relating to salary sacrifice arrangements. A typical arrangement would involve an employee giving up pay in return for a benefit that is either not taxed or taxed at a lower amount. For instance an employee could give up say pay of £30 per month in return for a mobile phone provided by their employer. The monthly pay would have been subject to tax and NI whereas the phone provision is tax free. Savings in NI would also be made by the employer.
New rules state that any new arrangements will now be taxed on the higher of the pay forgone or the benefit provided – in most cases the individual will be taxed on the income forgone. The rules do not apply to all salary sacrifice arrangements, for example the rules will not apply where pay is sacrificed in return for pension contributions made by the employer. There are also grandfathering rules which will apply to most benefits provided under salary sacrifice arrangements made before the new rules came into force in April 2017.
If you would like to discuss the changes please call your normal KN contact or Justin Smith on 0113 2044 228 or firstname.lastname@example.org