Changing the terms of a salary sacrifice agreement

Produced by Tolley in association with

Employment Tax

Guidance

Optional remuneration rules effective from 6 April 2017 affect the taxable amount of many benefits provided under salary sacrifice, as outlined in the Optional remuneration arrangements guidance note. However, attention is still required for the salary sacrifice agreement itself and the existing rules regarding changing the agreement itself still apply.

The concept of salary sacrifice is based on a tax case which was lost by the taxpayer. However, applying the reasoning from the case and based on the interpretation by HMRC (in particular see the GOV.UK website and EIM42700), salary sacrifice can still be used as a workable employee benefits delivery tool.

Background

In 1961, Mr Bell entered into a scheme with his employer under which, for a reduced salary, he could have the use of an Austin, which he could return if 14 days’ notice was given and see his salary revert to its original level. The tax treatment of the ‘payment’ made by Mr Bell was challenged by the Inland Revenue and led to the 1971 House of Lords’

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Robert Woodward

Employment Tax Manager at Frank Hirth plc

Robert is an expert in UK employment tax matters for employers with UK based employees, including UK employees working overseas, and overseas employees coming to the UK. He has extensive experience of advising clients with regards to PAYE matters, employee benefits and social security as well as employment related payments outside the payroll functions such as termination settlements and payments to consultants and other non-payroll labour. After graduating in Politics and Law from the University of Southampton, Robert started his tax career at HMRC as an employer compliance officer undertaking enquiries into employers' expenses and benefits systems before moving into a large international practice and then into the Big 4. Here he assisted with tax investigations, flexible benefits planning, employment tax compliance and international social security. Robert has presented to various audiences and has had a number of articles published in various magazines on employment tax matters. Robert is a fully qualified member of both the Association of Taxation Technicians (ATT) and the Chartered Institute of Taxation (CTA).

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