Government publishes draft legislation on limitations of salary sacrifice tax advantages

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The government has published draft legislation on the limitation of tax and employer national insurance contribution (NIC) advantages where benefits are offered through a salary sacrifice arrangement or where the employee is provided with a choice between a benefit in kind (BIK) and cash allowance.

The draft legislation has been published as part of the draft provisions due to be introduced in the Finance Bill 2017.

The limitations on the range of benefits that attract tax advantages were confirmed by Chancellor Philip Hammond in the Autumn Statement 2016, following a consultation that ran from 10 August to 19 October 2016.

From 6 April 2017, the taxable value of BIKs where cash has been forgone will be fixed at the higher of the current taxable value or the value of the cash forgone.

Alastair Kendrick, director at MHA MacIntyre Hudson, said: “This is not good news and will create a significant amount of administration for employers for what appears a small tax take.”

Arrangements that have been entered into before 6 April 2017 will be protected until 6 April 2018 or when the contract comes to an end, comes up for renewal or undergoes modification, whichever is the earlier.

Arrangements for cars, accommodation, and school fees will be protected until 6 April 2021.

Pensions, pensions advice, childcare vouchers, workplace nurseries, directly-contracted childcare, bikes-for-work schemes, and ultra-low emission vehicles (ULEVs) that emit 75g CO2/km or less are exempt from the changes.

Comments on the draft legislation should be submitted by 1 February 2017.