Supply and consideration ― salary sacrifice schemes

Produced by Tolley
Supply and consideration ― salary sacrifice schemes

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Supply and consideration ― salary sacrifice schemes
  • Is salary sacrifice consideration for a supply?
  • How are supplies valued in this context?
  • How do the rules apply in particular circumstances?
  • Practical points ― salary sacrifice and supplies

This guidance note looks at the VAT implications of salary sacrifice schemes.

For an overview of supply and consideration generally, see the Supply and consideration ― overview guidance note.

For detailed commentary on the legislation and case law in relation to salary sacrifice, see De Voil Indirect Tax Service V3.114.

Is salary sacrifice consideration for a supply?

HMRC’s guidance is clear that when deductions are made from salary for goods or services provided by an employer to their employees, they are liable for VAT. This is on the basis that the remuneration given up or sacrificed by the employee is consideration for the supply of taxable benefits supplied in return (assuming those benefits are taxable).

HMRC position is particularly influenced by a European case in which the CJEU was asked to consider an arrangement under which employees could opt to take part of their salaries in the form of retail vouchers. The Court found that the employees’ s

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