Government preps salary sacrifice clampdown

Workers who give up some of their taxable salary in return for perks will want to answer 10 questions ahead of a crackdown on such salary sacrifice arrangements.

Posed in a new consultation, the questions reflect the government’s plan from April 2017 to levy tax and employer NIC on Benefit-in-Kinds currently exempted from these liabilities.

Only a few ‘BiKs’ will be excluded from the plan, notably pensions saving; pensions advice, childcare and cycling safety equipment, but not health-related perks as Treasury officials had initially indicated.  

Also included in the crackdown, which will see workers taxed on the full amount of salary sacrificed from April 6th next year, will be those with BiKs such as gym membership, a company car and a company car parking space.

The Treasury said: “This proposal does not prevent employers from providing BiKs to their employees through salary sacrifice, but it will remove the tax and NICs advantages that come from doing so.

“Employers can still use salary sacrifice if they wish and the taxation of BiKs will be unaffected if offered outside of the salary sacrifice arrangement.”

The government’s forging ahead with the tightening of salary sacrifice arrangements dates back to Summer Budget 2015, when officials said they deprive the exchequer of billions in revenue and vowed to monitor them.

However as well as catching out employers, who benefit from salary sacrifice by having to pay less NI for employees using the set-up, it may wrong-foot some experts too.

In particular, one chartered adviser predicted the government leaving the arrangements completely alone in light of ‘practical issue trying to unravel them.’

But at this year’s Budget, the government effectively grouped BiKs via salary sacrifice into ‘good, bad and ugly’ categories, and said proposals would follow. The consultation on them closes in October.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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