Salary Sacrifice

Salary Sacrifice

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A director of a client wants to not go into 40% tax bracket but is on the border thereof. Can she opt for a salary sacrifice into the co pension without there being a formal scheme set up to enable all staff  to do likewise??

My reading says there should be a formal scheme - am I wrong??

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Portia profile image
By Portia Nina Levin
29th Sep 2014 16:08

Yes

You are wrong.

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By neileg
29th Sep 2014 16:51

Yes and no

When it's an owner managed business, obviously salary levels and pensions are totally in the control of the owner manager(s). They can reduce their salary and take the difference as a pension contribution or do anything they like - no need for any formal documentation.

Now the way I read the question suggests that we are talking director here but not controlling shareholder. In that case there may need to be payment parity with co-directors. In this case you could have a formal agreement but equally if all parties are satisfied then you don't need it. I'd still want some form of record of the decision to protect the sacrificing director, though.

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By Euan MacLennan
29th Sep 2014 16:52

Are you confusing ...

... salary sacrifice arrangements with some of the benefits for which salary sacrifices are used?

For example, employer-funded childcare (vouchers) must be available to all staff in order to qualify for the tax-free amount of benefit, but there are no such stipulations for the salary sacrifice arrangements that are often used as part of flexible benefits packages to pay for the childcare benefit.

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