So my understanding is if I sacrifice £1,000 in exchange for a benefit from my employer, they will now have to account for £200 of VAT (albeit, perhaps recovering £200 input VAT) on the supply to me of the benefit.
Which all makes sense for a VAT registered business, but say a business has a taxable turnover of £75,000 and then enters into salary sacrifice arrangements as above, for 5 employees. Have they now exceeded the £77k?
I imagine I will never see this, but I'm curious.
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does it help if the employer decides not to recover the VAT on a £500+VAT bike and then recovers just the £600 through salary sacrifice
No
The supply of the bike is taxable. Recovery or not of the input tax doesn't change this.
thanks Neil
my thinking was that given there is £100 of input tax to recover any penalty would be presumably be restricted to the VAT on any salary sacrifice in excess of the £600
Not the way that VAT works
There isn't a linkage like that between input tax and output tax. If the supply is taxable and takes you over the threshhold, there's no get out of gaol card to play.