HMRC consults on limiting salary sacrifice benefit schemes

Employers offering benefits in kind (BiKs) through a salary sacrifice arrangement will still be able to do so following a current HMRC consultation, but the tax and national insurance advantages for some BiKs will be reduced. The number of schemes using salary sacrifice to provide BiKs has grown significantly in recent years; the consultation document associated with the proposed rule change suggests the number of requests from employers for PAYE clearance on such schemes increased by a third between 2009/10 and 2014/15.

The Revenue argues that some employers are unaware that the use of salary sacrifice can reduce the level of certain state benefits claimed by employees, such as statutory maternity pay. The government indicated that it would consult on limiting the range of BiKs that attract tax advantages when provided as part of salary sacrifice schemes in this year’s budget. However, it has also stated that certain benefits it wants to encourage will still benefit from tax and NI relief, including pension saving, employer-supported childcare and cycle to work schemes.

‘Consultation on Salary Sacrifice for the Provision of Benefits in Kind’, HMRC, August 2016. The consultation closes 19 October 2016: www.gov.uk/government/consultations/salary-sacrifice-for-the-provision-of-benefits-in-kind