George Osborne made some fairly ambiguous statements about the future of salary sacrifice in his most recent budget, the Autumn Statement at the end of 2014. The official line is that ‘the government will stop tax relief from being claimed on reimbursed business expenses when they are paid in conjunction with a salary sacrifice scheme’. But what does this mean, and how does it affect businesses with existing salary sacrifice schemes? The suggestion that the government would try to decrease the number of salary sacrifice schemes has been around for a while. They have been gradually removing tax relief from certain benefits, like subsidised staff canteens, if they were allied to salary sacrifice arrangements.

The rising number of mobile workers also seems to have played a part in the government’s decision. There is a rising number of employees that connect travel and subsistence payments to salary sacrifice – so if they’re on the road with a salary sacrifice car for much of their working life (as a salesperson, or a home care worker, for example) they were significantly better off as a result. This is due to the fact that, by converting salary into allowances or specific expense payments into benefits in kind, they were avoiding paying tax or National Insurance Contributions. The savings, for a larger workforce in particular, were substantial – but the government has cottoned onto the fact that they are losing a lot of revenue in this area.

So how will this affect businesses going forward? The simple answer is that we don’t yet know. The Chancellor was deliberately ambiguous in talking about salary sacrifice in his budget, and it seems his government have not yet come up with a plan that will keep the public on side – especially in a crucial election year. HMRC are also reluctant to wade into the debate, stating that, as long as the appropriate tax laws are followed, it’s a matter of employment law.

Experts admit that there could be more done to control and police salary sacrifice – but it appears that the matter of salary sacrifice doesn’t seem to be a pivotal matter for any of the main parties vying for votes. For now, salary sacrifice schemes are safe and sound.

Tags : , , ,