Sweeping changes made to salary sacrifice rules
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What about salary sacrifice for extra paid holidays?
Seems harsh if it does apply but I lean towards the view that it does.
If it does then what about the scenario where a person requests a change from full time to part time working? Arguably that is no different from buying extra holidays.
The new rules don't apply to schemes where the benefit is something intangible, such as extra holidays. Such schemes simply mean that the employer agrees that the employee works fewer hours and therefore receives proportionately less pay.
I hope you are right. But do you have any backing for this view? In the Finance Bill benefit is defined as including "any benefit or facility, regardless of its form
and the manner of providing it" which strikes me as wide enough to embrace extra holidays. I can see nothing in the Employment Income Manual (link in main article) that addresses this issue.
There is something of a problem in that the guidance is , shall we say, still a little sparse! The best I can find is the statement on page 6 of the consultation response, which says "There will be no change where salary is sacrificed in return for intangible benefits such as additional annual leave....". The document is at https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil....
There is no change in value, hence it is not affected. So the employee will be taxed and pay Class 1 NICs on the payment received.
Thank you for the link. It is reassuring but the phrase "intangible benefits" makes me nervous as it includes the word benefit. As stated there is nothing I can see in the draft legislation that excludes this. Unless I have missed something (again!) may be the legislation will be amended or HMRC "interpret" the meaning of benefit not to include an intangible one. It is interesting that the original question refers to extra annual leave as not strictly involving the receipt of a benefit. When is a benefit not a benefit? When it is intangible!!
It's certainly not HMRC's intention to bring these arrangements into scope. As to whether they've succeeded in this objective with the wording they've used in the regulation is something we'll have to leave the lawyers to decide!
Is there anything about "salary sacrifice" in exchange for travel and subsistence allowances?
The amount of the OpRA will be subject to P11D tax and Class 1A.
Marginal benefit. HMRC policy have indicated that the comparison is on the amount of OpRA cash v the marginal benefit. The indication, for example, is that were a 2x life assurance is freely given to all employees, but through OpRA arrangement an employee could increase that to x4 cover, the comparison is between the amount sacrificed and the marginal cost difference.
Thanks for flagging up the trap Kate. All other commentary I've seen talks about people in existing OpRAs as at 5 April 2017 being protected until 6 April 2018. It looks as if schemes with an annual renewal date pre 6 April 2018 will be caught. So if your OpRA date is, say, 1 May 2017, the new rules apply from 1 May 2017, not 6 April 2018. That appears to be the case even if the arrangements don't actually change eg an employee currently gives up £50 a month in gross pay in exchange for car parking. The flexible benefits scheme renewal date is 1 May 2017. The employee elects to carry on with the current arrangement which still costs him £50 a month from gross. If the employer actually pays £75 plus VAT a month, the employee, with effect from 1 May 2017, is taxed on £90 a month.
Have I got that wrong?