Autumn Statement: What is the impact on flexible benefits and salary sacrifice?
04 December 2014
The Chancellor’s statement about countering “the avoidance of tax through special purpose share schemes, miscellaneous losses and payments of benefits in lieu of salary” has caused some commentators to worry about a possible attack on flexible benefit and salary sacrifice schemes. HMRC have provided us with some helpful reassurance.
HMRC have essentially given reassurance that the concern is only about reimbursed expenses included in a salary sacrifice scheme.
The HMRC clarification says that:
The reference to "payments of benefits in lieu of salary" referred to the announcement that tax relief will not be available in future on reimbursed expenses that are provided as part of a salary sacrifice scheme. This change is referenced in paragraphs 1.251 and 2.136 of the Autumn Statement document, reproduced below:
"1.251 As part of its reform of the rules for employee benefits and expenses in response to recommendations by the Office of Tax Simplification, the government will stop tax relief from being claimed on reimbursed business expenses when they are paid in conjunction with a salary sacrifice scheme."
"2.136 Simplification of the administration of employee benefits and expenses –
As announced at Budget 2014 the government will simplify the administration of employee benefits and expenses. From April 2015 the government will provide a statutory exemption for trivial benefits in kind costing less than £50. From April 2016, the government will remove the £8,500 threshold below which employees do not pay Income Tax on certain benefits in kind and replace it with new exemptions for carers and for ministers of religion. It will also exempt certain reimbursed expenses and introduce a statutory framework for voluntary payrolling. The new exemption for reimbursed expenses will not be available if used in conjunction with salary sacrifice. (Finance Bill 2015)"