On 10 August 2016, HMRC published a consultation document on the restriction of salary sacrifice arrangements, as announced at this year’s Budget. The stated intention is to reduce the range of benefits in kind that attract favourable income tax and national insurance contributions (NICs) treatment when provided by way of salary sacrifice.

As expected, the following benefits will not be affected:

  • employer pension contributions
  • employer-provided pension advice
  • employer-supported  childcare
  • provision of workplace nurseries
  • cycles and safety equipment provided under the cycle to work scheme.

The consultation document confirms that the government wants to “level the playing field” (as not all employers/employees offer/are offered such arrangements) but also to reduce the increasing cost to the Exchequer of these types of arrangements.

The proposal is that, save for the benefits listed above, a benefit in kind will be subject to income tax and NICs when provided by way of salary sacrifice even if it would normally be exempt from tax and NICs. The charge would be on the greater of the amount of salary sacrificed and the normal taxable value of the benefit. It is intended that the changes will take effect from April 2017.

The consultation can be viewed here.