Does your business operate a salary sacrifice scheme?

  • New rules will impact employers giving away benefits for cash
  • Businesses told to update their payroll urgently

New tax rules which came into effect this April mean businesses are required to declare almost all types of benefits in kind, including optional remuneration arrangements (OPRA).

The planned announcement follows a crackdown on salary sacrifice schemes – where employees can trade in a portion of their salary for a desirable benefit, but not pay income tax or national contributions on that part of their income.

This can include anything from gym memberships, health insurance, company cars and workplace parking.

A large part of salary sacrifice has already been outlawed since April last year, but this month’s changes will capture almost all benefits.

The only exceptions to this are pensions, pension advice, childcare, cycle-to-work schemes and cars with emissions of 75g CO2/km or less.

Cars with emissions above this threshold, as well as school fees and accommodation, will need to be declared from April 2021.

If a benefit in kind is provided under OPRA rules, the taxable value is now the higher of the cash foregone or the taxable value under the normal benefit in kind rules.

All benefits, apart from those which remain exempt, must now be reported on payroll form P11D.

HM Revenue & Customs says the most common errors in P11Ds received include inaccurate recording of car emissions, time apportionment and free use of fuel, as well as the incorrect classification of “making good”.

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