With government tax changes on the way, more and more employers are keen to cash in on tax and NI breaks through flexible benefits, says Jennifer Paterson
Offering perks with tax- and national insurance (NI) breaks has become a popular way to redirect cash back into a flexible benefits scheme. Popular options include childcare vouchers, bikes for work and pensions.
But some of these benefits have come under fire in the past couple of years, with the government issuing changes to tax relief or clarification on how flex and salary sacrifice schemes must operate in order to qualify for the tax efficiencies. For example, from 6 April this year, the government will restrict the level of tax relief for higher-rate taxpayers who receive childcare vouchers.
Such actions can lead to concern among employers. For example, HM Revenue and Customs' clarification around tax-efficient benefits has caused 45% of respondents to be cautious about introducing impacted benefits to flex, while 13% have withdrawn these perks.
Offering tax-efficient benefits via flexible benefits, however, can produce significant savings. Some 90% of employers currently offer benefits with tax and/or NI breaks via flex.
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Read more from Employee Benefits/Towers Watson Flexible Benefits Research 2011
