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Cash Allowances, Flexible Benefit Packages and Salary Sacrifice

Salary Sacrifice

A salary sacrifice arrangement is an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit. As an employer, you can set up a salary sacrifice arrangement by changing the terms of your employee’s employment contract. Your employee needs to agree to this change. To find more out about salary sacrifice and benefits in kind download our factsheet here.

Benefits in Kind

Did you offer Benefit in Kind to your employees during 2018-2019?

During 2018 to 2019 did you offer your employees any Benefit in Kind (BiK) with the option of a cash allowance, a flexible benefit package with a cash option or a salary sacrifice arrangement?

Back in April 2018 the rules changed.

The value of all Benefit in Kind is now the higher of the original value, or the amount foregone in the year. For previously exempt BiK, the taxable value is the amount foregone. These are known as the Optional Remuneration Arrangement (OpRAs) rules. You need to report the higher value on the P11D and P11D(b).

Contact our tax department now to find out more about salary sacrifice and how it can help you and your employees.

There were transitional provisions for arrangements during 2017 to 2018, but these mostly ended on 5 April 2018.

Continuing Transitional Provisions

Cars and accommodation

Some cars and accommodation are still subject to the old rules, if the arrangement:

  • was entered into on or before 5 April 2017, and
  • has not been renewed, or renewed automatically, and
  • has not been varied

The remaining cars and accommodation move into the current rules on 6 April 2021.

 

Childcare vouchers and directly-contracted childcare

As a reminder, all childcare voucher and directly-contracted childcare schemes, whether part of an OpRA or provided in addition to salary, closed to new entrants in early October 2018. As such, any new provision is now subject to tax and NICs.

For employees who are already in schemes can continue to receive tax and NICs relief as long as:

  • They have not changed employer (This includes any moves between employers of any kind, including within a group, end the tax and NICs relief, unless it is under TUPE), and
  • They have received a childcare voucher or directly-contracted childcare in the previous 52 weeks, and
  • They have not provided you with a Childcare Account Notice (to enter the Tax-Free Childcare scheme)

Unaffected items

Pension contributions, pension advice, workplace nurseries, Cycle to Work and cars with CO2 emissions of 75g CO2 or less are unaffected.

 

How can Haines Watts help?

Sound very complicated? Contact us now to find out how we can help you with Benefits in Kind and Salary Sacrifice.

If you’d like to find out more about Salary Sacrifice or anything else covered in this blog please give us a call to arrange an appointment.

Our tax team are on hand to ensure everything is filed correctly and on time and to make sure every tax saving opportunity is taken. To meet the team at Haines Watts Norwich click here.

Want to know more? Call us on 01493 800 800 or email greatyarmouth@hwca.com

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