Changing the terms of a salary sacrifice agreement
Employment Tax
Guidance
Optional remuneration rules effective from 6 April 2017 affect the taxable amount of many benefits provided under salary sacrifice, as outlined in the Optional remuneration arrangements guidance note. However, attention is still required for the salary sacrifice agreement itself and the existing rules regarding changing the agreement itself still apply.
The concept of salary sacrifice is based on a tax case which was lost by the taxpayer. However, applying the reasoning from the case and based on the interpretation by HMRC (in particular see the GOV.UK website and EIM42700), salary sacrifice can still be used as a workable employee benefits delivery tool.
Background
In 1961, Mr Bell entered into a scheme with his employer under which, for a reduced salary, he could have the use of an Austin, which he could return if 14 days’ notice was given and see his salary revert to its original level. The tax treatment of the ‘payment’ made by Mr Bell was challenged by the Inland Revenue and led to the 1971 House of Lords’
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