Pre-Budget report: Workplace canteen tax exemption to be removed

The government is to restrict the tax exemption for workplace canteens from April 2011 by removing the exemption when used in conjunction with salary sacrifice or flexible benefit arrangements.

In the pre-Budget report released today, the government said use of these arrangements enable a minority of employees to buy canteen meals out of pre-tax income, giving them an additional tax and national insurance contributions advantage that other employees do not enjoy.

The exemption will continue to apply for subsidised canteens that are available to all employees.

Mike Nagle, tax director at PricewaterhouseCoopers, said: "This draws a line from 2011 under the current uncertainty regarding the tax relief available for canteen arrangements linked to salary sacrifice. We are in contact with HMRC regarding a number of existing arrangements."