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Salary Sacrifice

A salary sacrifice scheme involves an employee giving up some of their gross pay in exchange for something in return, usually where the taxable value of the perk is less than the salary sacrificed. This produces both tax and NI savings for both the employee and employer.

 

Anti-avoidance rules took effect on 6 April 2017 and apply to schemes set up or amended on or after that date. However, the rules don’t apply to schemes that were in place before then, that is until 6 April 2018.

 

Where the taxable value of a perk is greater than the salary given up, the taxable amount is worked out using the usual tax rules for benefits in kind, but ignoring exemption. Equally, if the salary given up is greater than the taxable value of the perk then the taxable benefit is equal to the salary.

 

Making good benefits is where an employee makes a payment from their own funds (often by deduction from their net pay to their employer in return for being provided with a perk. The amount paid reduces the taxable amount of the benefit.

 

Making good is ignored for the purpose of deciding if the amount taxable under the anti- OPRA rules is the salary sacrificed or the taxable amount of the benefit, but is deducted to arrive at the final amount of benefit to be declared on form P11d.

11 Jun 2018

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