Everything You Need to Know about Osborne’s Salary Sacrifice Changes

George Osborne has made some fairly ambiguous statements in the Autumn Statement at the end of 2014. The statements raise surround the future of salary sacrifice and highlight the supposed salary sacrifice changes.

“The government will stop tax relief from being claimed on reimbursed business expenses when they are paid in conjunction with a salary sacrifice scheme.”

–          George Osborne

 

But what does this mean? How does it affect businesses with existing salary sacrifice schemes?

The conspiracy that the government are trying to decrease the number of salary sacrifice schemes have been around for a while. They have been gradually removing tax relief from certain benefits, like subsidised staff canteens.

The rising number of mobile workers also seems to have played a part in the government’s decision. There’s a large number of employees that connect travel and subsistence payments to salary sacrifice. If they have a salary sacrifice car for much of their working life, they were significantly better off as a result. This is because by converting salary into allowances, 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. It seems his government are clueless as to how to keep the public on side, especially in a crucial election year. HMRC are also reluctant to wade into the debate. They state 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. However, 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.

 

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