Effective from 6 April 2017 new legislation on optional remuneration arrangements (OpRA) adds a further consideration to the taxation of benefits provided through salary sacrifice. It builds upon the removal of tax advantages for canteens, home computers and travel payments provided through salary sacrifice which were already in place before the OpRA rules. FA 2017, Sch 2; ITEPA 2003, ss 69A, 69B

The salary sacrifice agreement conditions are set out in the Salary sacrifice arrangements ― overview guidance note and are unaffected by the OpRA rules.

The OpRA rules apply to two types of situation:

  • sacrificing current salary in favour of a benefit (‘traditional’ salary sacrifice) ― ‘Type A arrangements’
  • foregoing future salary / earnings (this is harder to ascertain) ― ‘Type B arrangements’

Whilst the first is generally understood, a question remains over to what extent “agrees to be provided with a benefit” as part of benefits package negotiations and to the extent they would be caught by Type B arrangements, for example what happens if an employee is offered benefits / cash equivalent (eg company car or car allowance) when promoted. HMRC guidance on this does not shed much light and it remains to be seen how it is enforced by HMRC in practice. However, it is worth remembering that a benefit must be provided in order for the legislation to apply, therefore, if no benefit is actually provided, the default is the receipt of salary which will be subject to PAYE / NIC via the payroll.

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