From April 2017, where optional remuneration benefits are provided to an employee, many employers (and employees) are likely to find their tax & NIC bills increase due to new rules. These changes were only recently published in the draft Finance Bill 2017 and are not well known to most employers.
The changes relate to two specific areas, namely salary sacrifice arrangements and cash alternative arrangements, with tax applied on the higher valued option under either of these areas.
For example, in a salary sacrifice arrangement, under the new rules, tax could be applied to the greater of the salary exchanged or the value of the benefit.
Of course, the new rules apply to Optional Remuneration, i.e. where the employer has a choice. If no choice is given, the employee will be taxed on what he/she receives without any adjustment for the equivalent.
The new rules are designed to remove the inequality between employees and employers who benefit from the tax & NIC advantages and those who don’t.
Optional Remuneration arrangements in place before 6 April 2017 are protected under grandfathering provisions until 5 April 2018 and arrangements involving cars/vans, living accommodations and school fees are protected until April 2021.
Completely exempt from the new rules include employer-provided pensions, childcare and ultra-low emissions vehicles.
More details are expected to follow soon and we are able to offer bespoke advice to employers on this matter.
To find out how the changes are likely to affect you and what action you should be taking, please contact [email protected] or call 01527 558539.