Salary Sacrifce School Fees Self Assessment

Salary Sacrifce School Fees Self Assessment

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II have a client who is a teacher at a private school.  The client’s children attend the school, he is given preferential rates on the fees and the agreed fee is deducted from his salary by Salary Sacrifice.

The school has issued a P11D for the Salary Sacrifice value.  Is this correct?  My limited understanding of Salary Sacrifice is that it was dealt with in the payroll?

Many thanks

Alex

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By Tim Vane
25th Nov 2015 13:13

What is the level of the salary? One assumes that it is more than £8500.

p.s. Why is an employed teacher in self assessment?

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Replying to AndrewV12:
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By alex
25th Nov 2015 13:24

Yes the teacher earns over £8500.

Has to complete a SA, for other reasons (Rental Income).

 

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By maxaca
25th Nov 2015 13:48

Agree that on the basis of the facts provided

there should be no P11D benefit - if salary has been reduced and effectively 'paid' over to the school.

Has the client spoken to the Bursar or whoever deals with the school payroll and P11D preparation?

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By alex
25th Nov 2015 13:52

Thank you.

I have asked the client to go back to the Bursar, but just wanted to check my thinking was correct..

 

 

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By Tim Vane
25th Nov 2015 13:53

And is the "preferential rate

And is the "preferential rate" by any chance half-price?

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By maxaca
25th Nov 2015 14:02

any benefit is the 'cost' to the employer

there is case law to the effect that the cost to a school of providing education for one more pupil (or even two or three, who happen to be those of staff members) is very small - the fees charged to external parents do not (or should not) represent the cost so even if they were half this might still be more than any taxable benefit,where the teacher did not make a salary sacrifice contribution....

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By Tim Vane
25th Nov 2015 14:03

Yes indeed Pepper v Hart. I was trying to understand why the school might have thought there may be a BiK.

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By stratty
25th Nov 2015 14:05

P11D

School fees for employees’ children
By extension, salary sacrifice is just as tax-effective for discounted school fees. Although discounted fees are not an exempt benefit, as the benefit-in-kind charge is limited to the marginal cost, there is still significant scope to make savings.

HMRC accepts, following the landmark Pepper v Hart case, that the benefit-in-kind charge arising is limited to the marginal cost to the school of providing the place, 15 per cent of the total fee is accepted automatically, although a lower figure may be used if a reduced marginal cost can be evidenced.

 

see http://www.fismagazine.co.uk/financial/accounting/salary_sacrifices.html

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By Portia Nina Levin
25th Nov 2015 14:17

The "benefit" is taxable

The "benefit" is taxable under section 62, rather than Chapter 10 (where Pepper v Hart would apply), in the circumstances described.

The author of the article to which stratty has linked describes a situation where the place is provided, and the employee agrees to a reduced salary, but the salary sacrifice is not replacing an alternative obligation to pay.

So the amount of the salary sacrifice has been correctly reported on the P11D, in my opinion.

I would also expect the salary sacrifice amount to be liable to Class 1 NIC via the payroll, rather than being liable to Class 1A, in these circumstances.

If the school has done both of those things, the school has got it right, in my opinion, and the teacher is no better off than had it come out of their net pay.

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By sijolees
25th Nov 2015 14:16

The concessionary fees can be very low, perhaps only 1/5 of the normal fee. So a BiK can arise between this amount and the cost to the school of providing the place for the child.

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By alex
25th Nov 2015 14:41

Thanks Everyone :-)

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