Consultation on restricting the use of salary sacrifice for the provision of benefits in kind

Following the Chancellor's announcement at Budget 2016, HMRC has published a consultation on restricting the use of salary sacrifice for the provision of benefits in kind.

Employer pension contributions, employer-provided pension advice, employer-supported childcare, provision of workplace nurseries, and cycles and safety equipment provided under the cycle to work scheme will not be affected, nor will salary exchanged for intangible benefits, such as flexible working or additional holiday entitlement. Payroll giving will also be unaffected.

However, HMRC proposes that other benefits in kind provided through salary sacrifice will become chargeable to income tax and employer NICs on the greater of the amount of salary sacrificed and the cash equivalent specified by statute (if any).

The change will take effect from April 2017. Employees who, before April 2017, have committed to a salary sacrifice arrangement relating to a tax-exempt benefit in kind that continues beyond that date will be treated as receiving a taxable benefit from that date onwards, and employers will become liable for the corresponding employers' NICs charge.

Responses to Consultation on salary sacrifice for the provision of benefits in kind are required by 19 October 2016.