Contrary to the impression held by some, salary sacrifice schemes are alive and well.

By its own admission, HMRC notes that:

“Salary sacrifice is about varying the employee’s terms and conditions as it relates to remuneration. It is, therefore, a matter for agreement between the employer and employee. We are only concerned that the correct amount of tax and NICs is paid on the different basis of remuneration provided under the revised terms and conditions.”[1]

If properly implemented, a salary sacrifice scheme can deliver significant savings (and benefits) to both the employer and employee. Schemes can include, but are not limited to, the following:

·         Personal Pension;

·         Childcare;

·         Restaurant/Canteens;

·         Bicycles;

·         Mobile phones;

·         Private Medical Insurance;

·         Work buses; and

·         Car parking (at or near place of work);

Taxation aside, however, there are other issues to consider before launching a salary sacrifice scheme. These include for example, the impact on the following:

·         national minimum wage.

·         child tax credit or working tax credits.

·         employee pension arrangements.

·         statutory maternity and paternity pay.

·         statutory sick pay could be affected.

·         mortgages.

The above should not preclude a client from considering a salary sacrifice scheme. What is important is that these factors are effectively communicated to employees to enable them make an informed decision on whether or not they should participate in the employer’s scheme.

As for HMRC, bespoke tax advice and structured planning should provide the client with the comfort required to make a successful post implementation[2] request to HMRC to avoid the challenge to the tax status of the scheme.