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Tax tip #6 – Salary plus benefit rather than salary sacrifice

Hand writing text caption inspiration showing Tax Tips.

2 minute read.

As explained in Tips 2 and 3, from 6 April 2017 alternative valuation rules apply to work out the taxable value for most benefits where provision is made via an optional remuneration arrangement, such as a salary sacrifice scheme.

As a result of this, if a tax exemption exists and the benefit is not one of those discussed in Tip 2 for which salary sacrifice arrangements remain beneficial, the exemption is lost where provision is made via a salary sacrifice scheme. Consequently, where an employer wishes to provide an exempt benefit to an employee which is not one of the following:

• employer-provided pension savings;

• employer-provided pension advice;

• childcare vouchers;

• employer-supported childcare;

• workplace nurseries; and

• employer-provided cycles and cyclists’ safety equipment

(including ‘cycle to work’ scheme).

It is better to provide it in addition to salary (under a salary plus benefits style arrangement), rather than under a salary sacrifice or flexible benefits scheme. By providing the benefit in this way the tax advantage is preserved; the employee is able to enjoy the benefit free of tax and National Insurance.

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