Value Added Tax

Supply and consideration ― VAT and salary sacrifice schemes

Produced by Tolley
  • 20 Apr 2022 12:26

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

  • Supply and consideration ― VAT and 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

Supply and consideration ― VAT and salary sacrifice schemes

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’ salary sacrifice was consideration for the supply of the retail vouchers.

HMRC’s policy was actually revised as a consequence of this case. As a result, ‘transitional’ arrangements can still apply where the salary sacrifice payments were in place prior to 28 July 2011. Details of these

Access this article and thousands of others like it
free for 7 days with a trial of TolleyGuidance.

There's no margin for error. Think Tax.
Think Tolley.

TolleyGuidance gives you direct access to critical, comprehensive and up-to-date tax information and expertise you can rely on.

TAKE A FREE TRIAL

Popular Articles

Property partnerships

OutlineFor income and capital gains tax purposes, partnerships are regarded as being tax transparent ― ie they are not taxed in their own right but instead taxation is applied to the partners.Accordingly, if the partners are individuals, then much the same considerations apply as for an individual

21 Mar 2022 07:31 | Produced by Tolley Read more Read more

Qualifying interest in possession trusts ― IHT treatment

Trust property, which is the subject of a qualifying interest in possession (QIIP), may become chargeable to inheritance tax on the following occasions:•on the death of the beneficiary with the interest in possession•on the death of the beneficiary within seven years after a transfer or lifetime

23 Mar 2022 10:57 | Produced by Tolley Read more Read more

Repayment of tax ― individuals

If the self assessment tax return shows that a repayment is due, the taxpayer can claim a repayment or leave it as a credit on their statement of account.The quickest and safest method is for HMRC to make the payment direct to the taxpayer’s bank or building society account and so they are asked to

22 Mar 2022 09:44 | Produced by Tolley Read more Read more