Will you be impacted by the introduction of Optional Remuneration Arrangements?
11 January 2017
During December 2016 a significant number of publications appeared on GOV.UK amongst which was the Summary of Responses to the Consultation on salary sacrifice for the provision of Benefits in Kind (BiKs).
HMRC also produced a briefing sheet to highlight how the treatment of items provided under a salary sacrifice arrangement would be changing. Included in the briefing sheet was the following:
“If you provide benefits to your employees in exchange for salary sacrifice / salary exchange or have a flexible benefits package where your employee can choose a benefit or cash, or where you provide benefits but offer your employee a cash alternative then you will be affected / need to know about these changes.”
We have highlighted the final section because you may not have been focussing on the detail of the consultation because you do not enter in to Salary Sacrifice arrangements.
The draft Finance Bill 2017 refers to such arrangements (including salary sacrifice) as Optional Remuneration Arrangements, and whilst a technical consultation is ongoing, it is clear that where there is an element of choice between cash or a Benefit in Kind (BiK), it is likely to be captured under the new rules due to begin from 6 April 2017.
A common example could be the provision of a company car, but the employer offers a cash allowance in the event the employee chooses to provide their own car for business purposes. Where the cash allowance is taken there will be no impact as a result of the new rules, however once the new rules take effect the taxable value of the benefit will be the higher of the current value of the BiK or the cash foregone.
Guidance is expected to be published by HMRC at the end of January to help us all to understand how these new rules will be applied.
Consultation is ongoing until 2 February 2017 and if you have any views, thoughts or concerns that you would like us to raise in our feedback please contact Samantha Mann via email at policy.
Equally if you are currently looking ahead and considering the additional cost of administering the new rules and would like to provide evidence for some research currently being undertaken, again please contact Samantha via the policy email, ideally (but not exclusively) by 18 January.
If you have been overlooking the December publications because you don’t operate Salary Sacrifice but you do offer a cash alternative to some/all BiKs you might want to review all current publications, full details are available through the CIPP Policy News Journal under 'General Expenses, Benefits & Reward News'.