• 23 Mar 2017
  • jane.potter

Many employers supply a range of benefits such as pension contributions, cars, childcare vouchers or bicycles, with employees permitted
to choose between receiving less salary and taking up a benefit, a ‘salary sacrifice’.

The Government is concerned that it is missing out on tax in such arrangements, as the benefit received may not attract the same level of tax and national insurance as the salary given up. So the rules are to change to ensure it gets the same income whether the employee receives a salary or a benefit.

This change will be phased in: it will only impact new salary sacrifice arrangements made from 6 April 2017 onwards. Existing arrangements will be caught if they are modified or renewed after that date, such as when a different company car is provided.

All existing salary sacrifice arrangements involving cars, vans, fuel, accommodation and school fees will come under the new rules from 6 April 2021. Other benefits, such as free car parking, will fall under the new rules from 6 April 2018. Some benefits won’t be affected at all, including pension contributions, subsidised meals and medical treatments.

If you offer a salary sacrifice arrangement to your employees, we should discuss how these changes will affect your business.

Company car tax becomes complex
Company Car
Previous post
Allowances for property and trading
Next post