These changes are beginning to have an impact on certain tax-free benefits provided to employees. The new rules effectively remove the income tax and employer NIC advantages of certain benefits such as mobile phones and workplace parking.
HMRC’s guidance on salary sacrifice schemes has recently been updated to clarify that the value of a new salary sacrifice arrangement must be calculated by using the higher of the amount of the salary given up or the value of the benefit.
When the changes were introduced it was confirmed that all arrangements in place before April 2017 will be protected for up to a year, and arrangements in place before April 2017 for cars with CO2 emissions above 75g/km, accommodation and school fees will be protected for up to 4 years except for some circumstances where the arrangement is varied, renewed or modified.
The following benefits are not currently affected by the changes:
- Employer provided pensions and pensions advice
- Childcare vouchers
- Employer provided childcare or workplace nurseries
- Bicycles and cyclist safety equipment including cycle to work schemes, and
- Ultra-low emission cars, below 75g/km
Employers and employees are still free to use salary sacrifice, but with the tax and Class 1A NICs advantages removed. Employees can reimburse their employer for the cash value of any benefit, after the end of the relevant tax year.